The High Court in London handed down judgment on Part C of the Lehman Waterfall II Application on 5 October 2016.
The judgment examines the extent of creditors’ entitlements to Default Rate interest on debts arising under ISDA Master Agreements governed by English law and New York law. As some £4.4 billion of LBIE’s admitted claims arise under ISDA Master Agreements and the debts were outstanding for more than five years, this judgment will materially influence the amount of money which must be applied in satisfaction of creditors’ entitlements to statutory interest.
Until 2013, no circuit court of appeals had weighed in on the implications of the U.S. Supreme Court’s pronouncement in the 203 North LaSalle case that property retained by a junior stakeholder under a cram-down chapter 11 plan in exchange for new value “without benefit of market valuation” violates the “absolute priority rule.” See Bank of Amer. Nat’l Trust & Savings Ass’n v. 203 North LaSalle Street P’ship, 526 U.S. 434 (1999), reversing Matter of 203 North LaSalle Street P’ship, 126 F.3d 955 (7th Cir. 1997).
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