"KBM provides capital to such companies, as an investment in return for shares purchased at a discount to market price."

So KBM is admitting to the court these loans are designed from the start to get discounted shares from the companies they lend money to.

Meaning KBM never intended for the loans to be repaid in cash, which is why they have such stiff prepayment penalty's.

I'm no lawyer but that statement could be very damaging to their case.