In a very recent decision, the U.S. District Court for the Southern District of New York determined that a negative inference to an exception to a negative covenant prevented a company from undertaking a proposed restructuring transaction. We find the case unique not because of the result necessarily, but rather because the court used the negative inference to override another express provision in the Credit Agreement.

Although there has been much discussion of the Second Circuit’s recent decision in Marblegate, this article addresses a question other commentators have yet to tackle: namely, how the Second Circuit’s decision impacts the Trust Indenture Act’s protection of guarantee obligations included in an indenture. Below we provide our view on how Marblegate affects indenture guarantees. More specifically, we discuss how the decision is consistent with provisions of the TIA that expressly protect a noteholder’s payment rights under a guarantee.

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