On August 26, 2014, Judge Drain concluded the confirmation hearing in Momentive Performance Materials and issued several bench rulings on cramdown interest rates, the availability of a make-whole premium, third party releases, and the extent of the subordination of senior subordinated noteholders.

On August 26, 2014, Judge Drain, of the Bankruptcy Court for the Southern District of New York, concluded the confirmation hearing in Momentive Performance Materials and issued several bench rulings on cramdown interest rates, the availability of a make-whole premium, third party releases, and the extent of the subordination of senior subordinated noteholders. This four-part Bankruptcy Blog series will examine Judge Drain’s rulings in detail, with Part I of this series providing you with a primer on cramdown in the secured creditor context.

“When a business becomes insolvent, many interests are at risk.  Creditors may not be able to recover their debts, investors may lose their investments and employees may lose their jobs. If the business is the sponsor of an employee pension plan, the benefits promised by the plan are not immune from that risk. The circumstances leading to these appeals show how that risk can materialize. Pension plans and creditors find themselves in a zero-sum game with not enough money to go around.

The Supreme Court of Canada released its highly anticipated decision in Indalex Limited (Re) this morning.  The ruling stemmed from an appeal of an Ontario Court of Appeal decision that had created commercial uncertainty among many participants in the financial services, pensions and restructuring industries.

The Ontario Court of Appeal decision in Indalex Limited (Re) has created considerable uncertainty over the priority status afforded to pension plan wind-up deficits, particularly in insolvency proceedings involving the plan sponsor.