In a prior blog post, “Making Sense of The Circuit Split on the Enforcement of Make-Whole Provisions in Bankruptcy,” we discussed the circuit split on the enforcement of a make-whole premium triggered by a bankruptcy petition. Shortly after that post was published, the U.S.

The enforcement of a lender’s claim for a make-whole premium in a chapter 11 case has created significant controversy among legal practitioners and the courts. Notably, the three circuit courts of appeal that have addressed make-whole claims, i.e. the Second, Third and Fifth Circuits, have issued conflicting decisions on the nature of these claims and their allowance under the Bankruptcy Code. In this post we provide a brief summary of make-whole premiums and address the controversy among the circuits.

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.