On October 14, 2022, the U.S. Court of Appeals for the Fifth Circuit issued a long-awaited ruling on whether Ultra Petroleum Corp.
In Short
The Situation: Courts have disagreed over whether a make-whole premium triggered by a borrower's bankruptcy filing must be disallowed as unmatured interest. They have also disputed whether the "solvent-debtor exception" requiring the payment of postpetition interest to unimpaired unsecured creditors of a solvent debtor survived the enactment of the Bankruptcy Code. Finally, courts have split on what rate of postpetition interest unimpaired unsecured creditors of a solvent debtor are entitled to receive.
In Short
The Situation: Bankruptcy courts have split on what rate of post-petition interest unimpaired creditors of a solvent debtor are entitled to receive. Bankruptcy courts have variously ruled that such creditors were entitled to the contractual rate of interest, interest at the federal judgment rate (about the rate on a one-year Treasury bill) as of the bankruptcy petition date, or an equitable rate. Another possibility is that no interest is payable at all.
The Pensions Regulator has issued a statement setting out its approach to Financial Support Directions in insolvency situations. It follows the Court of Appeal's decision in Bloom v The Pensions Regulator (Nortel) in October 2011 that a liability arising from a Financial Support Direction (FSD), or a contribution notice (CN), issued to a company in administration or liquidation will, except in very limited circumstances, amount to an expense of that administration or liquidation. As such, it will rank very highly in the payment priority order, in particular rank
The story of the restructuring of carpet-maker, Brintons has featured in the press recently, with emphasis on the role of Carlyle, one of the world's biggest private equity firms. The facts are similar to the Silentnight pre-pack which we featured in a previous bulletin. In each case, the Pensions Regulator is said to be considering using its anti-avoidance powers under the Pensions Act 2004 to compel senior debt holders to pay towards the deficit of the defined benefit pension scheme operated by the company.
The Pensions Regulator announced this week that it will not pursue action to impose a Financial Support Direction against US company, Chemtura Corporation and members of its group after a funding settlement, involving the payment of expedited contributions to the pension scheme of its UK subsidiary, was reached with the scheme's trustees.
The story of the Silentnight restructuring has featured in the press today. There have been calls for the Pensions Regulator to use its anti-avoidance powers under the Pensions Act 2004 to compel HIG Europe to pay more towards the considerable deficit of the Silentnight Pension Scheme, following the purchase of Silentnight out of administration by the private equity firm last Saturday. Earlier this year, Silentnight had failed to obtain the PPF's approval to a Creditors Voluntary Arrangement aimed at addressing its historic debt, including a pensions deficit of around £100m.