Feb. 13 (Bloomberg) -- The owner of the former U.S. presidential yacht Sequoia reached an agreement with a lender for a 60-day cease-fire in a dispute over a $5 million loan.
The two sides will keep the status quo temporarily while the case plays out in court, a lawyer for Sequoia’s owner and a lawyer for the lender said yesterday in separate e-mails. The accord couldn’t immediately be verified in court documents.
“We agreed to do so for 60 days, to provide more time to get to the actual merits of the dispute and because our current exercise notice of the option to purchase the Sequoia sets December 1 as the date on which the exercise would be completed,” Richard Graf, a Washington-based lawyer for the lender, FE Partners LLC, said in an e-mail.
Larry Hutcher, an attorney for the yacht’s owner with the law firm Davidoff Hutcher & Citron LLP, said the agreement was reached after both sides made arguments to Delaware Chancery Court Judge Sam Glasscock III.
Gary Silversmith, president of the partnership that bought the vessel in 2000, sued FE Partners on Feb. 1, accusing the lender of wrongfully attempting to seize the 88-year-old vessel in a dispute over its loan. The owners asked a judge to bar FE Partners, whose investors include an Indian business family, from laying claim to the 104-foot boat.
Half the Loan
FE Partners funded only half the loan before manufacturing defaults in an attempt to seize the yacht, lawyers for Sequoia Presidential Yacht Group LLC said in the complaint.
The lender countered in court papers that the Silversmith partnership’s outstanding debt and mounting legal violations triggered defaults on the loan.
L. Michael Cantor, a director for FE Partners, said in an affidavit that the lender uncovered “a string of outstanding unpaid debts and legal violations,” triggering a modification to the loan agreement. The changes included an increase in the initial interest rate and a decrease in the price at which FE was entitled to purchase the Sequoia or Silversmith’s interest in the vessel.
The amended agreement also called for an additional 40 percent decrease in the purchase price if FE Partners gave notice of its intention to exercise its purchase option at the time of a default.
Silversmith is seeking a court order forcing FE Partners to accept full payment of the monies paid out so far and release its lien against the Sequoia so that a new lender can be found, Hutcher said.
Lawyers will decide on a schedule for gathering pre-trial evidence later this week, he said.
Built in 1925, the Sequoia served as the official presidential yacht for 50 years before former President Jimmy Carter, a Democrat, sold the vessel in 1977 as part of an effort to cut governmental expenses. The wooden-hulled yacht was designated as a National Historic Landmark in 1987.
The Sequoia served more than nine presidents including Harry Truman, who was allegedly on board when he decided to drop the atomic bomb on Hiroshima, according to a history of the vessel on the Sequoia group’s website. President Dwight D. Eisenhower allowed Britain’s Queen Elizabeth to use the yacht during a visit, and Winston Churchill spent time with Franklin D. Roosevelt on the Sequoia.
Truman once became so enraged during a poker game that he damaged a table with a cigar cutter, according to the Sequoia website. He later installed a piano in the main salon where he and Richard Nixon both played.
Nixon used the Sequoia on at least 88 occasions often sailing down the Potomac River to Mount Vernon. During Watergate, he allegedly believed the vessel was bugged and demanded that an electronic shield be built around the entire yacht requiring small pinholes drilled six inches apart on the entire railing, according to the website.
President John F. Kennedy, the crew’s favorite, also celebrated his last birthday on the yacht, according to the history.
The case is Sequoia Presidential Yacht Group LLC v. FE Partners LLC, CA 8270, Delaware Chancery Court.
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