On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company,1 ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year.
In a brief but significant opinion, the United States District Court for the District of Delaware reversed a decision by the United States Bankruptcy Court for the District of Delaware and allowed more than $30 million in unsecured, post-petition fees incurred by an indenture trustee ("Indenture Trustee").1 In reversing, the District Court relied upon a uniform body of Court of Appeals opinions issued on the subject.
Intercreditor agreements--contracts that lay out the respective rights, obligations and priorities of different classes of creditors--play an increasingly important role in corporate finance in light of the continued prevalence of complex capital structures involving various levels of debt. When a company encounters financial difficulties, intercreditor agreements become all the more important, as competing classes of creditors seek to maximize their share of the company's limited assets.
On October 20, 2017, in In re MPM Silicones, LLC ("Momentive"), Nos. 15-1682, 15-1771, 15-1824, the Second Circuit Court of Appeals, considering the Supreme Court's opinion in Till v. SCS Credit Corp., 541 U.S. 465 (2004), adopted the Sixth Circuit's two-step approach to determining an appropriate cramdown interest rate that, in certain circumstances, results in the application of a market rate of interest. In doing so, the Second Circuit reversed the bankruptcy and district court holdings on the cramdown interest rate issue.
On January 17, 2017, in a long-awaited decision in Marblegate Asset Management, LLC v. Education Management Finance Corp.,1 the US Court of Appeals for the Second Circuit held that Section 316 of the Trust Indenture Act ("TIA") does not prohibit an out of court restructuring of corporate bonds so long as an indenture's core payment terms are left intact.
On January 17, the US Court of Appeals for the Second Circuit rendered a much anticipated decision in Marblegate Asset Management, LLC v. Education Management Corp., No. 15-2124-cv(L), 15-2141-cv(CON), reversing the Southern District of New York's holding that only a non-consensual amendment to an indenture's core payment terms violates Section 316(b) of the Trust Indenture Act (TIA).
On November 17, 2016, the US Court of Appeals for the Third Circuit in Delaware Trust Co. v. Energy Future Intermediate Holding Co. LLC, No. 16-1351 (3d Cir. Nov. 17, 2016) clarified the often-muddy interplay between indenture acceleration provisions and "make-whole" redemption provisions, holding that Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. (collectively, "EFIH") were unable to avoid paying lenders approximately $800 million in expected interest by voluntarily filing for bankruptcy.
The financial pressure on the oil and gas industry is well known. Dozens of oil and gas companies have defaulted on credit facilities or filed bankruptcy recently and industry observers expect many more to follow.
This article was originally published in the January 2014 issue of Pratt's Journal of Bankruptcy Law.
Preference actions are common in bankruptcy cases. These actions seek to claw back payments made by a debtor to a creditor during the 90 days before the commencement of a bankruptcy case.
On December 5, 2013, Judge Steven Rhodes of the US Bankruptcy Court for the Eastern District of Michigan held that the city of Detroit had satisfied the five expressly delineated eligibility requirements for filing under Chapter 9 of the US Bankruptcy Code1 and so could proceed with its bankruptcy case.