Creditors File Petition for Rehearing En Banc After Fifth Circuit Reversal and Remand of Bankruptcy Court Decision Awarding Creditors Make-Whole and Post-Petition Interest in Accordance with the Terms of the Underlying Agreement.

Executive Summary

Fifth Circuit Holds that Disallowance of Claim Pursuant to the Bankruptcy Code Does Not Render Such Claim Impaired and Casts Doubt on Creditors’ Ability to Recover Make-Whole Amounts or Post-Petition Interest at the Default Contract Rate

Executive Summary

The Second Circuit issued its much anticipated decision in Marblegate Asset Management LLC v. Education Management Corp., holding that “Section 316(b) prohibits only non-consensual amendments to an indenture’s core payment terms.” At issue is whether the phrase “right . . . to receive payment” forecloses “more than formal amendments to payment terms that eliminate the right to sue for payment.” The Second Circuit held that it does not.

Since Marblegate was decided in 2014, the only court to address claims under §316(b) of the Trust Indenture Act (“TIA”) in the context of a corporate restructuring transaction is

The Second Circuit Court of Appeals heard oral arguments in Marblegate Asset Management LLC v. Education Management Corp. on May 12, 2016. One might have thought from the courtroom’s overflow crowd that it was the opening argument in a mob trial, but this is a case about a bond indenture. At issue is whether an out-of-court debt restructuring that did not amend the indenture’s principal and interest terms, but that effectively precluded the noteholders’ ability to be repaid, violated § 316(b) of the Trust Indenture Act (TIA).