Trenwick could not do, however, is to defraud the creditors of Trenwick America in order
to benefit itself.
Supposedly, the reorganization of Trenwick’s subsidiaries in connection with the
LaSalle transaction was such a maneuver. As was discussed in colloquy at argument, the
Litigation Trust now contends that by the time of the LaSalle merger, Trenwick’s board
knew the entity could not prosper as a whole. Therefore, it allegedly concentrated its
largest liabilities and worst-performing assets in the line of subsidiaries under Trenwick
America, on the theory that it would allow that line to fail, leaving the rest of Trenwick to
There is a fatal problem for this theory, however, which is that there are not pled
facts to support it. Nothing in the complaint suggests that Trenwick was able to off-load
its own ultimate responsibility for the $490 million in debt to Trenwick America alone.
Trenwick America’s assets were used by Trenwick to support debt procured by
Trenwick.76 Trenwick itself went into bankruptcy at the same time as Trenwick America.
Furthermore, despite all its rhetoric about a three-card monte, the Litigation Trust
has never rationally articulated how the reorganization of Trenwick’s subsidiaries worked
a particular injury on Trenwick itself or Trenwick America. It appears to be the case that
Trenwick America emerged out of the reorganization being primarily responsible for the
$260 million credit revolver, secondarily responsible for the Lloyd’s line of credit (if
Trenwick International could not pay it off), and having responsibility for $190 million in
76 Hefter Decl. Ex. C Ex. 10.1 at §§ 5.08, 6.14, 10 (Credit Agreement dated Nov. 24, 1999 between Trenwick and lenders); Stone Aff. Ex. 7 at F-17 (Trenwick America 10-K filed Apr. 2, 2001).