Legal Issues Raised In The SH 130 Lawsuit

The SH 130 lawsuit was filed in early March 2018 in the U.S. Bankruptcy Court for the Western District of Texas. The claims by lenders raise some key legal issues:

~ Fraudulent Payments

If the original developer has failed to meet design or construction standards and is obligated to rectify, then the lenders must step up to rectify if they want to avoid default and potential damages and termination. This is the scenario that has played out on SH-130, Segments 5&6.

The lenders there now seek to recover the millions they must spend to fix the roadway problems. Apparently, their legal theory is one of fraudulent payments to the affiliated DB contractor at a time the original equity investors allegedly knew that the project was not financially viable. A fraudulent transfer to an affiliate would not be forgiven in bankruptcy.


About Bill Reinhardt

Editor of Public Works Financing newsletter
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