Prepayment premiums (also referred to as make-whole premiums) are a common feature in loan documents, allowing lenders to recover a lump-sum amount if a borrower pays off loan obligations prior to maturity, effectively compensating lenders for yield that they would have otherwise received absent prepayment. As a result of the widespread use of such provisions, three circuit courts of appeal – the U.S. Court of Appeal for the Second, Third and Fifth Circuit – have recently had to address the enforceability of prepayment provisions in bankruptcy.

On November 26, 2019, the US Court of Appeals for the Fifth Circuit held in Ultra Petroleum Corp. v.

In the United States, in a typical plain vanilla lending arrangement, if a counterparty files for bankruptcy, an automatic stay of enforcement actions is imposed that would prevent a lender from (i) foreclosing on the property of the debtor, (ii) terminating contracts with the debtor, (iii) commencing or continuing certain enforcement actions against the debtor or its property and/or (iv) setting off amounts owed under such arrangements (in each case unless a motion is filed and granted in the related bankruptcy case).

In recent weeks, the dispute in Windstream’s bankruptcy between Windstream and its REIT spinoff Uniti Group over the lease transaction that ultimately led to Windstream’s chapter 11 bankruptcy has continued to escalate with Windstream filing an adversary complaint against Uniti. In its complaint, Windstream seeks to recharacterize the lease as a disguised financing alleging that the lease resulted in a long-term transfer of billions of dollars to Uniti to the detriment of Windstream’s creditors.

Pacific Gas and Electric Company's Chapter 11 filing earlier this year has highlighted an issue that is well settled but sometimes overlooked: Unsecured creditors generally have no right to receive immediate payment of their legal fees from a bankrupt borrower, regardless of any contractual rights they might otherwise have absent the bankruptcy.

Although the Supreme Court identified three guideposts for evaluating whether a punitive award is unconstitutionally excessive 23 years ago in BMW v. Gore and refined those guideposts 16 years ago in State Farm v.

Taggart v. Lorenzen, No. 18-489

Today, the Supreme Court held 9-0 that a creditor cannot be held in contempt of court for violating a bankruptcy discharge order if there is a “fair ground of doubt” as to whether the order barred the creditor’s conduct.

On May 20, 2019, the Supreme Court decided Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657. In an 8-1 decision, and in a majority opinion authored by Justice Kagan, the Court held that the debtor-licensor’s rejection of a trademark license under Section 365 of the Bankruptcy Code “has the same effect as a breach outside bankruptcy” and, as such, the debtor, through such a rejection, could not rescind the non-debtor’s licensee’s right to continue to use the trademarks; in short, the debtor-licensor’s rejection of the license “cannot revoke the license.” Slip Op. at 16-17.

Yesterday, in an 8-1 decision, the US Supreme Court held in Mission Product Holdings, Inc. v.

Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657

Today, the Supreme Court held in an 8-1 decision that when a debtor, acting under Section 365 of the Bankruptcy Code, rejects a contract licensing its trademarks, the contract is not rescinded and the debtor thus cannot revoke the trademark license.