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.

One consequence of the depressed real estate market has been numerous Chapter 11 bankruptcy cases wherein the debtor seeks confirmation of a “dirt-for-debt” plan. In such a plan, instead of paying the secured creditor the value of the real property securing the debt through restructured loan terms, the debtor proposes to convey part or all of the real property securing the debt to the creditor in full satisfaction of its secured claim.