In an interesting precedent, which could have significant ramifications for the future, the Judge in the Yellowstone Club bankruptcy proceedings ruled that Credit Suisse engaged in predatory lending practices in its $375 million first-lien debt to the super-luxury country club.  Apparently, Credit Suisse didn’t even request audited financials prior to approving the loan and was solely interested in the $7.5 million origination fee.

The remedy in this case is even more surprising:  CS’s first-lien debt is to be subordinated to even unsecured debt to the bankrupt super luxury club.

“Credit Suisse and the development owners would benefit, while their developments — and especially the creditors of their developments — bore all the risk of loss,” wrote judge Kirscher.

“The only plausible explanation for Credit Suisse’s actions is that it was simply driven by the fees it was extracting from the loans it was selling, and letting the chips fall where they may.”

“The only equitable remedy to compensate for Credit Suisse’s overreaching and predatory lending practices in this instance is to subordinate Credit Suisse’s first lien position to that of CrossHarbor’s super-priority debtor-in-possession financing and to subordinate such lien to that of the allowed claims of unsecured creditors,” wrote Judge Kirscher.