May 22, 2022

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Ares Sued by Millette’s Hudson Debt Fund Over Aircraft Loan

Ares Management was sued by a specialist credit fund co-founded by a former Goldman Sachs Group Inc. partner over the sale of collateral on a loan to a struggling Norwegian airline.

Hudson Structured Capital Management Ltd., an alternative-asset manager, claims that several Ares funds that held the notes directed that aircraft used as collateral be sold to an Ares affiliate, despite a higher offer from an external bidder, according to the lawsuit, filed last week in New York State Supreme Court.

Hudson, founded by former Goldman partner and credit specialist Michael Millette and onetime Pacific Investment Management Co. executive David Andrews, was an investor in the notes and alleged that it lost at least $14.3 million as a result of the “sham foreclosure sale.” In the suit, Hudson seeks at least that much in compensation as well as unspecified punitive damages and other payments.

Spokesmen for Ares and Hudson declined to comment on the suit.

Behind-the-Scenes Look

The complaint offers a behind-the-scenes look at a dispute involving some of Wall Street’s most seasoned negotiators. The 10 Boeing 737-800 planes at issue were bought by Norwegian Air Shuttle ASA and used as collateral for loans to support the purchase of the aircraft in 2016. They were valued at as much as $300 million in February and were then sold to Ares’ newly formed Vmo Aircraft Leasing for $250 million as part of the airline’s bankruptcy restructuring, according to the lawsuit, filed June 8.