Apollo Says Pandemic Rules Out €93M Spanish Resort Deal

By Christopher Crosby
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Law360, London (October 15, 2020, 6:18 PM BST) -- U.S. investment firm Apollo has pushed back against a Spanish hotel group's lawsuit in London, arguing it was entitled to back out of a €93 million ($108.8 million) resort deal due to the untold harm caused by the pandemic.

Apollo Capital Management told the High Court in an Oct. 14 filing that the firm cannot be forced to complete a funding agreement with Lopesan Group for two luxury hotels in the Canary Islands because the Spanish hotel company refused to disclose the financial harm to its business.

The resort's value has likely fallen due to the crisis and the agreement should be terminated as a result, the firm argued. As an alternative, the price should be reduced to reflect the substantial change to its finances, Apollo said.

The pandemic was "unforeseeable to the parties" when the agreement was struck in late last year and "outside their control," Apollo wrote.

The investment firm claimed in its defense filing that the interruption to the resort's business has likely played havoc on its finances, cast doubt on its future, and called into question its relationship with customers, employees and suppliers. The hotel group reached a share sale and purchase agreement through Apollo's Spanish investment vehicle, Oldavia ITG SLU, in November 2019.

Lopesan has failed to provide representations and warranties on those issues, as well as its right to use the premises as hotels in light of Spain's restrictions on hotels, and Apollo argued that gave it the right to terminate the agreement.

"In the premises, if the claimant would have been unable as at the signing date to repeat and ratify the representations and warranties so as to confirm that they were true on the completion date then Oldavia was not obliged to complete by paying the completion payment and/or was entitled to terminate the SPA," the filing says.

The lawsuit stems from a deal the hotel group and Oldavia struck last year for five- and four-star hotels, as well as restaurant, bar and conference facilities in San Bartolomé de Tirajana in Gran Canaria, one of Spain's Canary Islands.

Lopesan has argued that a condition precedent — a contractual term that, if breached, may allow a claim to be rejected — was fulfilled when the European Commission approved the deal in April.

Following meetings in February Lopesan and Oldavia eventually agreed that the fund would be given an extended deadline of April 30 to complete funding in light of the pandemic.

But Apollo claims Oldavia's chief called his counterpart at Lopesan in on April 13 and called the deal off, something both sides eventually agreed too.

Though Oldavia pledged to discuss "future business opportunities," it made "it clear that there would be nothing in terms of commitment," according to the defense filing. Even if the firm is forced to complete the deal, it will have a damages claim against Lopesan for the allegedly overpriced shares, Apollo's lawyers argued.

Lopesan lost a bid to force a quick trial in the case earlier in October. 

Lopesan Touristik is represented by Huw Davies QC and David Peters of Essex Court Chambers, instructed by Addleshaw Goddard LLP.

The defendants are represented by Laurence Rabinowitz QC, Richard Mott and Michael Watkins of One Essex Court, instructed by Latham & Watkins LLP.

The case is Lopesan Touristik SA v. Apollo European Principal Finance Fund II (Dollar A) LP and others, case number CL-2020-000597, in the Commercial Court of the High Court of Justice of England and Wales.

--Additional reporting by Joanne Faulkner.

For a reprint of this article, please contact reprints@law360.com.

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