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Duke Energy settles suit over Crescent bankruptcy

Duke Energy and creditors of its former land-development arm, Crescent Resources, have settled a lawsuit claiming Duke caused Crescent’s 2009 bankruptcy.

The parties asked a federal court in Austin, Texas, on Tuesday to dismiss the lawsuit against Duke, several subsidiaries and individuals. The settlement terms are confidential, Duke said.

Duke and the other defendants had offered a partial settlement of $50 million last August, according to a securities filing.

In November, both sides told the court they had settled the case during mediation. Any final payments to settle the suit would be made this month, they reported.

Crescent was one of the Southeast’s most prominent developers when it filed to reorganize as the recession hit and the housing bubble burst.

Creditors who formed the Crescent Resources Litigation Trust sued Duke in 2010, shortly after Crescent emerged from bankruptcy protection.

Their suit claimed that Duke forced Crescent to borrow $1.5 billion in 2006, then transferred nearly $1.2 billion to Duke. The creditors said Duke inflated the value of Crescent’s real estate holdings to close the transaction, despite signs of dwindling real estate sales.

The creditors’ trust said the $1.2 billion loan, along with Crescent’s interest and fee payments totaling $267 million, were fraudulent transfers that should be returned to Crescent’s bankruptcy estate.

Duke maintained that the transactions were legitimate and didn’t break state or federal law. The court granted Duke’s request to dismiss the claim that $252 million in interest be returned, Duke’s securities filing said.

In October, the filing said, the court granted Duke’s motion for summary judgment on the fraudulent transfer claim. Trial was scheduled for this month on remaining state-law claims including breach of fiduciary duty.

“Duke Energy is pleased that a settlement has been reached between the parties, ending the litigation and resolving this matter,” Duke said in a short statement. Duke is not part of any other litigation involving Crescent, the company said.

A call to one of the law firms representing the Crescent Resources Litigation Trust was not immediately returned.

Under Crescent’s bankruptcy exit plan, secured creditors – mostly banks – took ownership of the company. The restructured company would be worth $650 million, compared with the $2.2 billion in assets it listed in its bankruptcy petition.

The unsecured creditors represented by the litigation trust stood to lose $350 million to $450 million, according to court filings.

Duke, which formed Crescent in 1969, sold a 49 percent stake in Crescent to Morgan Stanley in 2006. Duke reported $265 million in charges and equity earnings losses from its Crescent holdings in 2008 and 2009.

Crescent rebranded itself as Crescent Communities in 2013. The company has launched residential projects in Charlotte, Tampa, Austin and Nashville, according to its website.

Henderson: 704-358-5051; Twitter: @bhender
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