Happy Friday. Here’s what we’ve got today…

• A look at the dispute over a Brightline make-whole payment

• Plus, Blue Owl considers purchase of data center investor IPI Partners

Make-whole spat:

Morgan Stanley has moved to dismiss a $750 million lawsuit filed against it in New York State Supreme Court, denying accusations that the firm fraudulently handled a debt financing process for a high-speed rail project.

The lawsuit is related to an investment made by Certares and Knighthead Capital Management through their jointly managed CK Opportunities Fund, formed during the pandemic to invest in distressed travel and tourism assets.

In 2022, the fund acquired more than half of a $360 million Morgan Stanley loan to Brightline Holdings, a Fortress Investment Group-backed high-speed rail operator.

At issue is a "make-whole" provision in the loan’s credit agreement, designed to protect lenders in the event of early loan repayment by compensating for the loss of expected yield.

In this case, Certares and Knighthead claim they specifically entered into the deal because of the make-whole provision. The two firms say that Morgan Stanley, which had been working to move the loan off of its balance sheet, pitched the investment on the basis of the provision and the expectation that Brightline would soon raise additional debt that would trigger a mandatory prepayment of the existing loan and a corresponding payment of the make-whole amount.

A mandatory prepayment of this type could, however, only be triggered by a Brightline subsidiary. A technicality, allege the plaintiffs, that Morgan Stanley and Brightline tried to use as a way to sidestep any future make-whole payments.

On the same day that CK Opportunities Fund purchased the loan, the plaintiffs say that Brightline subsidiary BL West Holdings issued preferred LLC units to a group of affiliated entities in an attempt to terminate its obligations as a Subsidiary under the original Credit Agreement — thereby allowing it to raise additional debt at some point in the future without triggering the mandatory prepayment and make-whole payment.

The rationale for the release was that, as a result of the issuance, BL West Holdings would no longer be a wholly owned subsidiary of Brightline Holdings.

The firms say Morgan Stanley concealed this preferred issuance from them in part by making changes to the credit agreement without their knowledge.

"Morgan Stanley fraudulently swapped out a signature page of plaintiff CK Opportunities Fund and placed it onto an amendment to the Credit Agreement containing language about the prohibited transaction that plaintiffs had neither seen nor agreed to."

The firms say they discovered the discrepancy months later after purchasing an additional $90 million exposure to the loan from Morgan Stanley.

In response, Certares and Knighthead believe they’re due the $750 million make-whole payment precisely because of Brightline’s attempt to avoid it. The preferred unit issuance, they say, violated the credit agreement’s prohibition on the sale of any "Capital Stock" as well as its limitations on affiliate transactions.

"By engaging in this voluntary transaction in breach of the Credit Agreement, Brightline Holdings, under New York law, opened itself up to liability that would require prepayment of the loan and corresponding payments of the Make-Whole Amounts."

Morgan Stanley, in its motion to dismiss filed on Monday, disputes this series of events and maintains that Certares and Knighthead are attempting to coerce an unwarranted windfall.

Calling the fraud claims "implausible," Morgan Stanley argues that the alleged scheme would have been detrimental to its own economic interests. Because it’s also a lender to Brightline, the firm says that it would have benefitted from the make-whole provision and would, therefore, have no incentive to aid in its avoidance.

Even so, say Certares and Knighthead, Morgan Stanley was still acting in its rational self-interest.

Their reasoning: “… so that Morgan Stanley could position itself for future lucrative investment banking business with Brightline Holdings and its private equity owners at Fortress, including through handling municipal debt transactions for Brightline Holdings.”

Morgan Stanley characterized the assertion as nothing more than "conjecture" in its response this week.

Brightline Holdings, also named as a defendant in the suit, has separately filed for dismissal of the claims. Fortress Investment Group, while not a party to the case, has denied involvement in the loan deal and has resisted the plaintiffs' attempts to depose co-founder Wesley Edens.

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• Apollo Global Management (NYSE: APO) is in late-stage talks to acquire Barnes Group (NYSE: B), a manufacturer of aerospace components trading at a market value above $2 billion, per Reuters.

• Spirit Airlines (NYSE: SAVE) is negotiating with bondholders over terms of a potential bankruptcy filing following its failed $3.8 billion merger with JetBlue Airways, per The Wall Street Journal.

• Cisco Systems (Nasdaq: CSCO) agreed to invest in cloud computing provider Coreweave at a $23 billion valuation.

• Hg is preparing to sell smartTrade Technologies, an electronic trading and payments platform, which could be valued at around €1 billion.

• Blue Owl Capital (NYSE: OWL) is in talks to acquire IPI Partners, an investor in data centers and other digital infrastructure, for around $1 billion.

• Temasek Holdings is in early talks to acquire a 10 percent to 15 percent stake in Haldiram Snacks, an Indian snack maker, at a potential valuation of around $11 billion, per Bloomberg.

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• Outdoor Living Supply, backed by Trilantic North America, acquired Garden Supply Hardscapes, a Northern California distributor of hardscape materials.

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• ICE USA, a portfolio company of Godspeed Capital Management, acquired Robert G. Campbell & Associates, a Knoxville, Tennessee-based civil engineering firm.

• Zayo Group and TPG are competing to acquire the fiber and wireless assets of Crown Castle (NYSE: CCI), which could be worth up to $10 billion, per Reuters.

• Bregal Investments is considering a take-private offer for Novem Group (FRA: NVM), a German car interior designer that went public three years ago.

• MrBeast acquired Vouch, a creator hiring platform backed by Seven Seven Six, Liquid 2 Ventures, and Shrug Capital.

• Accel-KKR acquired VisiQuate, a provider of healthcare revenue cycle analytics and workflow automation solutions.

• LongWater Partners has formed Cypress Rail Solutions, a new railcar services platform, after acquiring certain railcar maintenance assets from Northern Plains Rail Services.

• Renovus Capital Partners sold portfolio company LeapPoint, a digital marketing orchestration and performance agency, to Omnicom.

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Tech, Vertical SaaS, & Misc. Enterprise

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• Crescendo, an AI customer experience platform, raised $50 million in Series C funding led by General Catalyst, with participation from Celesta Capital and Alorica.

• Resolve AI, a software operations automation startup , raised $35 million in seed funding led by Greylock, with participation from Unusual Ventures.

• Voyage AI, a developer of retrieval-augmented generation to reduce hallucinations, raised $20 million in Series A funding led by CRV, with participation from Wing VC, Conviction, Snowflake, and Databricks.

• AirOps, an AI workflow platform for marketers, raised $15.5 million in Series A funding led by Unusual VC, with participation from Wing VC, Founder Collective, XFund, and Alt Capital.

• Vieu, an AI sales optimization platform, raised $11 million in Series A funding led by Trilogy Equity Partners, with participation from Incubate Ventures and Vela Ventures.

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Fintech

• Zepz, a digital cross-border payments platform, raised $267 million in new funding led by Accel, with participation from Leapfrog, IFC, TCV, and Coller Capital.

• KOHO, a Canadian digital banking fintech, raised C$190 million in new funding, including C$40 million in equity led by PROPELR Growth and C$150 million in debt.

Healthcare

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• Rippl, a virtual dementia care provider, raised $23 million in Series A funding led by Kin Ventures, with participation from General Catalyst, ARCH Ventures, GV, Mass General Brigham Ventures, F-Prime, 1843 Capital, and JSL Health.

Industrials, Greentech, & Other

• Submer, a provider of immersion cooling solutions for data centers, raised $55.5 million in Series C funding led by M&G, with participation from Planet First Partners, Norrsken VC, and Mundi Ventures.

• Mstack Chemicals, a Houston-based specialty chemical manufacturing platform, raised $40 million in Series A funding co-led by Lightspeed and Alpha Wave Global, with participation from HSBC Innovation Banking.

• Voliro, a Swiss aerial robotics startup developing drones for industrial inspections, raised $12 million in Series A funding led by Cherry Ventures.

• Blackstone plans to raise over $10 billion for its third Asia private equity fund, per Bloomberg.

• Summit Partners raised $9.5 billion for its 12th flagship U.S. growth equity fund.

• LGT Capital Partners raised $7 billion for its sixth private equity secondaries fund.

• GHK Capital Partners raised $870 million for its second fund focused on North American middle market industrials investments.

• Frazier Life Sciences raised an additional $630 million for its evergreen Public Fund focused on small- and mid-cap biotech.

• Fidelity Investments raised $250 million for its first dedicated venture capital fund.

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