FILED: NEW YORK COUNTY CLERK 07/06/ :10 PM INDEX NO /2017 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 07/06/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK RIMROCK HIGH INCOME PLUS (MASTER) FUND, LTD. AND RIMROCK LOW VOLATILITY (MASTER) FUND, LTD., Plaintiffs, against AVANTI COMMUNICATIONS GROUP PLC, AVANTI BROADBAND LIMITED, AVANTI COMMUNICATIONS LIMITED, AVANTI SPACE LIMITED, AVANTI COMMUNICATIONS MARKETING SERVICES LIMITED, AVANTI HYLAS 2 LIMITED, AVANTI HYLAS 2 CYPRUS LIMITED, and AVANTI HYLAS SERVICES LIMITED, Index No /2017 Motion Seq. #001 Defendants. REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS MOTION TO DISMISS THE COMPLAINT MILBANK, TWEED, HADLEY & MCCLOY LLP Alan J. Stone Nicole C. Nielson 28 Liberty St. New York, NY Phone: (212) Fax: (212) astone@milbank.com Dated: July 6, of 15

2 Page i of iii TABLE OF CONTENTS PRELIMINARY STATEMENT... 1 ARGUMENT... 2 I. PLAINTIFFS FAILURE TO SATISFY THE INDENTURE S NO-ACTION CLAUSE DOES NOT FIT WITHIN ANY EXCEPTION A. Plaintiffs Are Required to Comply with the No-Action Clause in Article 6 of the Indenture Plaintiffs Claims Are Governed by Section 6.06 of the Indenture Plaintiffs Have Plead an Event of Default as Defined in Section 6.01 of the Indenture Plaintiffs Contractual Claims Belong to the Trustee, Not to Individual Noteholders II. PLAINTIFFS HAVE NOT STATED A CLAIM FOR BREACH OF CONTRACT A. Plaintiffs Have Not Stated a Claim for Breach of the Indenture B. Plaintiffs Have Not Stated a Claim for Breach of the Covenant of Good Faith and Fair Dealing CONCLUSION i 2 of 15

3 Page ii of iii Cases TABLE OF AUTHORITIES Page(s) 150 Broadway N.Y. Assocs. v. Bodner, 14 A.D.3d 1, 784 N.Y.S.2d 63 (1st Dep t 2004)...9 A.N.R. Inv. Co. v. HSBC Private Bank, 135 A.D.3d 632, 25 N.Y.S.3d 78 (1st Dep t 2016)...10 Bank of N.Y. v. Battery Park City Auth., 251 A.D.2d 211, 675 N.Y.S.2d 860 (1st Dep t 1998)...5 Blackrock Core Bond Portfolio v. U.S. Bank Nat l Ass n, 165 F. Supp. 3d 80, (S.D.N.Y. 2016)...3 Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine Partners, 93 A.3d 1203, (Del. 2014)...9 Cruden v. Bank of New York, 957 F.2d 961 (2d Cir. 1992)...4 In re Electroglas, Inc., No , 2009 WL (Bankr. D. Del. Sept. 23, 2009)...9 Feder v. Union Carbide Corp., 141 A.D.2d 799, 530 N.Y.S.2d 165 (2d Dep t 1988)...5 Mamoon v. Dot Net Inc., 135 A.D. 656, 25 N.Y.S.3d 85 (1st Dep t 2016)...7 Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 944 N.E.2d 1104, 919 N.Y.S.2d 465 (2011)...7 One William St. Capital Mgmt. L.P. v. U.S. Educ. Loan Tr. IV LLC, No , 2017 WL (Sup. Ct. N.Y. Cnty. May 17, 2017) (Bransten, J.)...6 In re Part 60 Put-Back Litig., 146 A.D.3d 566, 45 N.Y.S.3d 418 (1st Dep t 2017)...3 Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549 (2014)...6 RBC Capital Mkts., LLC v. Educ. Loan Tr. IV, No. 6297, 2011 WL (Del. Ch. Dec. 6, 2011)...5 ii 3 of 15

4 Page iii of iii Sheth v. N.Y. Life Ins. Co., 273 A.D.2d 72, 709 N.Y.S.2d 74 (1st Dep t 2000)...10 STS Partners Fund, LP v. Deutsche Bank Sec., Inc., 149 A.D.3d 667 (1st Dep t 2017)...6, 7 Statutes N.Y. Civ. Prac. L. & R. 3211(a)(1), (3), and (7)...1 Trust Indenture Act of 1939, 15 U.S.C. 77ppp(b) (2012)...4 iii 4 of 15

5 Page 1 of 11 Avanti Communications Group plc ( Avanti ), and Avanti Broadband Limited, Avanti Communications Limited, Avanti Space Limited, Avanti Communications Marketing Services Limited, Avanti HYLAS 2 Limited, Avanti HYLAS 2 Cyprus Limited, and Avanti HYLAS Services Limited (together with Avanti, Defendants ), respectfully submit this Reply Memorandum of Law in Further Support of their Motion to Dismiss the Complaint, 1 pursuant to 3211(a)(1), (3), and (7) of the New York Civil Practice Law and Rules ( CPLR ). PRELIMINARY STATEMENT Plaintiffs Memorandum of Law in Opposition to Defendants Motion to Dismiss, ECF No. 26 ( Pls. Opp n Br. ), fails to remedy the fatal flaws in Plaintiffs Complaint: lack of standing and failure to state a claim. In their Opposition, Plaintiffs first seek to circumvent the bargained-for terms in the Indenture that govern Plaintiffs Notes. While fully conceding that they did not comply with the no-action clause, Plaintiffs argue, incorrectly, that their claims come within a limited exception that allows holders to sue for the non-payment of principal or interest. But Plaintiffs Complaint is not about non-payment of principal or interest all payments have been dutifully made according to the now-amended terms of the Indenture. Plaintiffs true aim is to invalidate those Amendments to the Indenture Amendments that were approved in accordance with the terms of the Indenture by Noteholders representing nearly 94% of the outstanding Notes. The purpose of the no-action clause is to prevent the type of litigation that Plaintiffs bring here: dissatisfied minority noteholders using the court as a tool against the consensus of the majority noteholders abiding by the terms of the Indenture. 1 All undefined terms shall have the meanings ascribed thereto in Defendants Opening Brief, ECF No. 19 ( Defs. Br. ), filed June 2, of 15

6 Page 2 of 11 Plaintiffs also attempt to salvage their attempted attack on the Amendments through conclusory, unsupported allegations that Defendants engaged in secret side deals to wrongfully induce Noteholder consent for the Amendments, in purported breach of the terms of the Indenture. But Plaintiffs baseless accusations ignore the fully disclosed consideration offered to all Noteholders, including Plaintiffs, in exchange for their consent to the Amendments, and they continue to offer no evidence, circumstantial or otherwise, that would indicate any side deal with any Noteholders. Plaintiffs refusal to participate in the Amendments does not qualify as a breach of contract; their allegations do not sustain their purported cause of action. None of Plaintiffs arguments carries water they cannot remedy their lack of standing, nor is there a breach of the explicit or implicit terms of the Indenture on which to base a cause of action. Accordingly, Plaintiffs Complaint should be dismissed, with prejudice. ARGUMENT I. PLAINTIFFS FAILURE TO SATISFY THE INDENTURE S NO-ACTION CLAUSE DOES NOT FIT WITHIN ANY EXCEPTION. There is no dispute that the Indenture contains a no-action clause and that Plaintiffs did not even attempt to comply with that provision. Instead, Plaintiffs incorrectly claim that the no-action" clause in Section 6.06 of the Indenture is inapplicable, relying instead on a limited exception allowing Noteholders to sue for unpaid principal and interest payments in Section 6.07 of the Indenture. But a plain reading of Plaintiffs Complaint demonstrates that Plaintiffs claims are based on allegations that the Amendments to the Indenture were invalid and impaired Plaintiffs ability to benefit from investment in the Notes. (Stone Aff. Ex. 1, Compl ; see also Pls. Opp n Br. 1 ( The essence of Plaintiffs Complaint is that Defendants purported to amend the terms of the 2013 Indenture through unlawful means.... ).) The noaction clause in Section 6.06, not the limited exception in Section 6.07, applies to Plaintiffs 2 6 of 15

7 Page 3 of 11 claims. Plaintiffs failure to comply with Section 6.06 deprives them of standing and bars this lawsuit. A. Plaintiffs Are Required to Comply with the No-Action Clause in Article 6 of the Indenture. No-action clauses, like the one in the Indenture here, vest the Trustee with power to enforce the Indenture and limit an individual noteholder s ability to bring suit except where certain conditions are satisfied. New York courts have consistently found that failure to satisfy the no-action clause conditions deprives plaintiffs of the necessary standing by which to bring their claims. (Defs. Br. 8). Plaintiffs argue here that the no-action clause is inapplicable for three reasons: (i) their claims are brought under an exception to the no-action clause, (ii) their claims do not depend on an Event of Default, and (iii) the no-action clause is inapplicable because the Trustee could not bring the claims. (Pls. Opp n Br. 4-5.) All three of Plaintiffs reasons are without basis in law or fact; their claims fall squarely within the noaction clause. 2 2 Plaintiffs claim that if even just one of steps of the no-action clause is deemed inapplicable or otherwise moot, they are excused from complying with the entire provision. (Pls. Opp n Br. 4, citing Blackrock Core Bond Portfolio v. U.S. Bank Nat l Ass n, 165 F. Supp. 3d 80, (S.D.N.Y. 2016).) Not only do all of the steps in the no-action clause apply for all of the reasons set forth in Defendants Brief, but Plaintiffs failure to undertake them is fatal to their cause of action. (Defs. Br. 8-9; see also, e.g., In re Part 60 Put-Back Litig., 146 A.D.3d 566, 568, 45 N.Y.S.3d 418, 420 (1st Dep t 2017) (affirming dismissal of claims where plaintiffs failed to plead with particularity their compliance with the no-action clause).) Plaintiffs misconstrue the Blackrock decision, where the noteholders brought suit against the trustee for alleged breaches of representations and warranties that the trustee should have known were defective. See Blackrock Core Bond Portfolio, 165 F. Supp. 3d at The Blackrock court held that when noteholders challenge a trustee s behavior, the demand requirement renders the entire clause moot. Id. at Here, however, there is no challenge to the Trustee s behavior and the no-action clause applies. 3 7 of 15

8 Page 4 of Plaintiffs Claims Are Governed by Section 6.06 of the Indenture. First, Plaintiffs seek to escape compliance with the no-action clause by relying on Section 6.07 of the Indenture a limited exception that permits a Noteholder to bring suit for payment of interest or principal when due. 3 Although Plaintiffs concede that their claims arise from allegations that the Amendments to the Indenture were wrongfully enacted, they insist that because they are merely seeking a cash interest payment due in April 2017, Section 6.07 exempts them from needing to satisfy the no-action clause. (Pls. Br. 4-5; Stone Aff. Ex. 1, Compl. at 16.) This argument, which was not plead in the Complaint, is contrary both to the purpose of Section 6.07 and to the allegations of the Complaint. The provision on which Plaintiffs rely, Section 6.07, is required under Section 316(b) of the Trust Indenture Act. 15 U.S.C. 77ppp(b). The purpose of provisions like Section 6.07 is to grant noteholders an absolute right to institute suit after nonpayment of principal or interest only. Cruden v. Bank of New York, 957 F.2d 961, 968 (2d Cir. 1992). Section 6.07, however, does not preclude amendments to indentures that are explicitly authorized. (Defs. Br ). It is clear that Section 6.07, consistent with the Trust Indenture Act, is meant to co-exist with the amendment provisions. The Indenture s clearly delineated amendment process contained no prohibition against amending the payment terms. The interpretation of Section 6.07 that Plaintiffs seek here, an exception to the requirements of the no-action clause following the enactment of the Amendments, would lead to an absurd result: properly enacted amendments of payment terms would always be subject to 3 Plaintiffs Complaint is devoid of any reference to Section Plaintiffs relied on the language in Section 6.06 in their Complaint, citing to it repeatedly for the proposition that they were unfairly prejudiced when the holders of nearly 94% of the Notes consented to the Amendments. (See, e.g., Stone Aff. Ex. 1, Compl. 74, 81, 82, 84, 87.) 4 8 of 15

9 Page 5 of 11 challenge. Here, Plaintiffs have been paid their PIK interest, in accordance with the Amended and Restated Indenture. In any event, contrary to Plaintiffs position, the relief sought is predicated on allegations of an underlying breach of the Indenture terms. Bank of N.Y. v. Battery Park City Auth., 251 A.D.2d 211, 211, 675 N.Y.S.2d 860, 861 (1st Dep t 1998) (dismissal warranted where no-action clause barred claims seeking interest that plaintiffs expected to receive were it not for the allegedly wrongful redemption ). At bottom, Plaintiffs seek damages for the purported breach of the Indenture governing their Notes. (Stone Aff. Ex. 1, Compl. 5; id. at 16.) In Plaintiffs ideal world, the Amendments, which were properly enacted pursuant to overwhelming Noteholder consent in accordance with the clear terms of the Indenture, would be invalidated, and Plaintiffs investment would remain as it was before the Amendments. This is exactly the type of claim that courts have determined may only be pursued in accordance with no-action clauses like those found in Section 6.06, and cannot be subject to limited exceptions like those found in Section See, e.g., Feder v. Union Carbide Corp., 141 A.D.2d 799, 800, 530 N.Y.S.2d 165, 167 (2d Dep t 1988) (holding that an exception to indenture s no-action clause did not include breach of indenture claims); see also RBC Capital Mkts., LLC v. Educ. Loan Tr. IV, No. 6297, 2011 WL , at *2 (Del. Ch. Dec. 6, 2011) (dismissing claims and rejecting plaintiff s theory that exception to no-action clause did not apply to breach of contract claim, which would be an end run around the limitations imposed by the no-action clause [and] contrary to the purposes of no-action clauses ). 2. Plaintiffs Have Plead an Event of Default as Defined in Section 6.01 of the Indenture. Plaintiffs then argue that the no-action clause is inapplicable because their claims do not rely on any enumerated Event of Default defined in Section 6.01 of the 5 9 of 15

10 Page 6 of 11 Indenture. (Pls. Opp n Br. 4-5.) Plaintiffs claim this exemption applies by virtue of the fact that they have not plead an Event of Default. (Id. at 5, citing Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549, 568 (2014).) Plaintiffs reliance on Quadrant is misplaced; although they may not have used the words, Plaintiffs have plead an Event of Default under the Indenture. The Quadrant court found, like here, that the plaintiff s contractual claims related to default of the securities, and were likewise barred for failure to satisfy the no-action clause. Quadrant, 23 N.Y.3d at 568; see also One William St. Capital Mgmt. L.P. v. U.S. Educ. Loan Tr. IV LLC, No , 2017 WL , at *4-5 (Sup. Ct. N.Y. Cnty. May 17, 2017) (Bransten, J.) (explaining the distinction between contract and non-contract claims with respect to no-action clauses). Plaintiffs claimed damages, as explained supra, are grounded in contract. This requested relief meets the definition of Event of Default that Section 6.01 contemplates. (Stone Aff. Ex. 2, 2013 Indenture 72.) ( 6.01(a) defines Event of Default as default for 30 days in the payment when due of interest of Additional Amounts, if any, with respect to the Notes ). Because Plaintiffs claims are based on contractual provisions and allege an Event of Default, the no-action clause must be satisfied before bringing suit. 3. Plaintiffs Contractual Claims Belong to the Trustee, Not to Individual Noteholders. Plaintiffs further argue that the no-action clause does not apply because their claims could not be brought by the Trustee. (Pls. Opp n Br. 5.) The case on which Plaintiffs rely for this proposition, STS Partners, is inapposite and provides no such support for their claim. Plaintiffs citation omits critical distinguishing language showing that the case holds that an indenture trustee can bring a breach of fiduciary duty claim, but the case does not bar a trustee from bringing breach of contract claims like those at issue here. STS Partners Fund, LP v. Deutsche Bank Sec., Inc., 149 A.D.3d 667, 668 (1st Dep t 2017) ( [A] no-action clause does not 6 10 of 15

11 Page 7 of 11 bar claims such as a breach of fiduciary duty against a corporation s board of directors that an indenture trustee cannot bring. ) (emphasis added). Here, there is nothing preventing the Indenture Trustee from bringing the contractual claims that Plaintiffs plead. II. PLAINTIFFS HAVE NOT STATED A CLAIM FOR BREACH OF CONTRACT. There is no dispute that Plaintiffs do not like the Amendments, even though the Amendments were permitted under the plain terms of the Indenture and were undertaken with full disclosure and with the consent of holders representing more than 90% of the existing Notes. Plaintiffs elected not to consent to the Amendments, and they did not participate in the fully disclosed consideration offered to consenting Noteholders. 4 Plaintiffs double down on their wholly illusory side deal allegations, and despite their efforts at creative interpretation of their own pleading, those allegations remain without any support. While courts must assume that facts are true as pleaded, and accord them favorable inferences, no such inferences are warranted where the factual allegations consist of bare legal conclusions, or... are inherently incredible. Mamoon v. Dot Net Inc., 135 A.D. 656, 658, 25 N.Y.S.3d 85, 88 (1st Dep t 2016); see also Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 179, 944 N.E.2d 1104, 1108, 919 N.Y.S.2d 465, 469 (2011) (holding that a plaintiff s complaint should not be afforded favorable inferences when it is devoid of facts and require[s] leaps of facts and logic ). Here, the unsupported allegations in the Complaint require enormous leaps of logic to draw implausible inferences; Plaintiffs speculative conjecture is insufficient to sustain this cause of action. 4 Despite Plaintiffs outrageous and unsupported claim that consenting Noteholders must have been provided with additional undisclosed consideration, the terms of the consent fee and New Money Offer were fully disclosed to all Noteholders in the Solicitation Notice. (Stone Aff. Ex. 3, Solicitation Notice 14-22; Ex. 4, Public Solicitation Announcement) 7 11 of 15

12 Page 8 of 11 A. Plaintiffs Have Not Stated a Claim for Breach of the Indenture. Plaintiffs insistence that this Court should infer that other Noteholders benefitted from alleged side deals is specious. (Pls. Opp n Br. 8.) Plaintiffs base this allegation on only one circumstance purported meetings held between the Majority Noteholders and Avanti before the Consent Solicitation and New Money Offer were announced. Plaintiffs then make the inferential and purely speculative leap that Avanti made some unidentified side deals with consenting noteholders. This is not a reasonable inference. A more plausible and reasonable inference is that Avanti wanted to make certain that a substantial portion of the Noteholders supported the terms of the Amendments before launching a solicitation. Despite its implausibility, Plaintiffs breach of contract claim rests on this unreasonable inference: alleged side deals purportedly accrued to the benefit of others, but not Plaintiffs. Plaintiffs point to language at the end of Section the same no-action clause that they claim does not apply as a bar to standing and ask the Court to read into it a powerful rule preempting the amendment process set forth in the Indenture. (Pls. Opp n Br. 6-7.) Plaintiffs incorrectly claim that they were unfairly prejudiced by the Amendments in a way that is not permitted by Section But Plaintiffs ignore the fact that they were given the same opportunities to receive the same consideration in exchange for consent to the Amendments. Instead, Plaintiffs withheld their consent and now complain that the Amendments were impermissible under the Indenture. Plaintiffs characterization of this language is contrary to court decisions and public commentary. As detailed in Defendants Brief, the Delaware Supreme Court, applying New 5 The language on which Plaintiffs incorrectly rely is as follows: A holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain preference or priority over another Holder of a Note. (Stone Aff. Ex. 2, 2013 Indenture 76.) 8 12 of 15

13 Page 9 of 11 York law, found that amendments approved by a majority of consenting noteholders were permissible, notwithstanding that the indenture there containing the exact same language upon which Plaintiffs rely here. (Defs. Br ; see Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine Partners, 93 A.3d 1203, (Del. 2014).) Contrary to Plaintiffs assertion that Caspian is inapposite because the defendants there were other noteholders and not the issuer, the holding of Caspian is unaffected by such a distinction. (Pls. Opp n Br. 7.) Plaintiffs miss the crux of the Caspian holding; the language in Section 6.06 on which Plaintiffs rely is only applicable where noteholders rights have been prejudiced vis-à-vis other noteholders rights, regardless of whether the defendant is the issuer or another noteholder. Nor do Plaintiffs other authorities save their claim. See, e.g., In re Electroglas, Inc., No , 2009 WL (Bankr. D. Del. Sept. 23, 2009) (holding that noteholders would violate an indenture provision [different language than that which applies here] by purchasing debtor-issuer assets in a bankruptcy proceeding that would have allowed some noteholders to be paid while others were not). Here, all Noteholders were provided the opportunity to avail themselves of the same consideration in exchange for consent to the Amendments, in complete accordance with the terms of the Indenture. Plaintiffs twisted reading of the language in Section 6.06 does not provide them with any basis for asserting their breach of contract claim; it should be dismissed. Finally, Plaintiffs assertion that their action is for payment of cash interest under Section 6.07 is defeated by clear documentary evidence that unambiguously contradicts Plaintiffs allegations. 150 Broadway N.Y. Assocs. v. Bodner, 14 A.D.3d 1, 5, 784 N.Y.S.2d 63, 65 (1st Dep t 2004). As detailed supra, the heart of Plaintiffs dispute is about the validity of the consented-to Amendments to the Notes. Article 9 of the Indenture expressly permits amendments on consent. (Stone Aff. Ex. 2, 2013 Indenture ) These terms defeat 9 13 of 15

14 Page 10 of 11 Plaintiffs breach of contract claim because the Amendments effectuated changes to the Indenture, and under the new terms of the Indenture, no cash payment of interest is due or owed. See A.N.R. Inv. Co. v. HSBC Private Bank, 135 A.D.3d 632, , 25 N.Y.S.3d 78, (1st Dep t 2016) (holding that a breach of contract claim cannot be sustained where the express terms of the contract authorized defendant s actions). B. Plaintiffs Have Not Stated a Claim for Breach of the Covenant of Good Faith and Fair Dealing. Even though Plaintiffs correctly claim that they may plead claims in the alternative, their claim for breach of the covenant of good faith and fair dealing arises from the same facts surrounding the consent for the Amendments and is duplicative of their failed breach of contract claim; it should also be dismissed. See Sheth v. N.Y. Life Ins. Co., 273 A.D.2d 72, 73, 709 N.Y.S.2d 74, 75 (1st Dep t 2000). In any event, Plaintiffs allegations are conclusory and unsupported; there is no basis from which the Court can reasonably infer that the implied covenant was breached. Not only did Defendants disclose the consideration offered to all Noteholders in exchange for consent to the Amendments, the Amendments and the process under which they were enacted were permissible under the bargained-for terms of the Indenture that binds Plaintiffs Notes. Accordingly, Plaintiffs have failed to state a claim for breach of the covenant, which is fatal to their action. CONCLUSION Defendants respectfully request that the Court dismiss the Complaint with prejudice because, as detailed herein and in Defendants Motion, Plaintiffs have neither standing nor a cause of action of 15

15 Page 11 of 11 Dated: July 6, 2017 New York, New York MILBANK, TWEED, HADLEY & MCCLOY LLP By: /s/ Alan J. Stone _ Alan J. Stone Nicole C. Nielson 28 Liberty Street New York, New York Phone: (212) Fax: (212) astone@milbank.com of 15

FILED: NEW YORK COUNTY CLERK 07/19/ :58 PM INDEX NO /2016 NYSCEF DOC. NO. 53 RECEIVED NYSCEF: 07/19/2016

FILED: NEW YORK COUNTY CLERK 07/19/2016 04:58 PM INDEX NO. 651587/2016 NYSCEF DOC. NO. 53 RECEIVED NYSCEF: 07/19/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK PERSEUS TELECOM LTD., v.