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Second Liens Beware Delaware Bankruptcy Court Finds De Facto Claim Subordination Under Intercreditor Agreement

Executive Summary

On December 27, 2018, the United States Bankruptcy Court for the District of Delaware issued an opinion in In re La Paloma Generating Co., Case No. 16-12700 (Bankr. D. Del. Dec. 27, 2018) [Docket No. 1274], that should raise substantial concerns for junior secured creditors.

In particular, the La Paloma opinion determined that:

USA, Company & Commercial, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, United States bankruptcy court
Marblegate: what does it mean for European restructurings?

In a highly-anticipated decision on a long-running bondholder dispute, the US Court of Appeals for the Second Circuit issued its judgment last week in Marblegate Asset Management LLC v Education Management Corp. It concluded that “Section 316(b) [of the US Trust Indenture Act 1939] prohibits only non-consensual amendments to an indenture’s core payment terms”, i.e. the amount of principal and interest owed and the maturity date.

European Union, USA, Capital Markets, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Bankruptcy, Consideration, Second Circuit