Prepayment premiums (also referred to as make-whole premiums) are a common feature in loan documents, allowing lenders to recover a lump-sum amount if a borrower pays off loan obligations prior to maturity, effectively compensating lenders for yield that they would have otherwise received absent prepayment. As a result of the widespread use of such provisions, three circuit courts of appeal – the U.S. Court of Appeal for the Second, Third and Fifth Circuit – have recently had to address the enforceability of prepayment provisions in bankruptcy.
In recent weeks, the dispute in Windstream’s bankruptcy between Windstream and its REIT spinoff Uniti Group over the lease transaction that ultimately led to Windstream’s chapter 11 bankruptcy has continued to escalate with Windstream filing an adversary complaint against Uniti. In its complaint, Windstream seeks to recharacterize the lease as a disguised financing alleging that the lease resulted in a long-term transfer of billions of dollars to Uniti to the detriment of Windstream’s creditors.
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.
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 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 15, 2016, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) held in In re Trump Entertainment Resorts that section 1113 of the Bankruptcy Code permits a debtor to reject an expired collective bargaining agreement (“CBA”).
On May 21, 2015, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) affirmed the order of the United States District Court for the District of Delaware in Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.) approving a settlement and dismissal of a chapter 11 case by way of a “structured dismissal.” A structured dismissal is, simply, the dismissal of the bankruptcy case preceded by other orders, such as an order approving a settlement or granting releases, which survive dismissal of the case.
On May 4, 2015, the Supreme Court of the United States affirmed the order of the United States Court of Appeals for the First Circuit dismissing the appeal of chapter 13 debtor Luis Bullard for lack of jurisdiction.1 The Court held that the order of the Bankruptcy Court denying confirmation of Bullard’s proposed chapter 13 plan was not a final order from which Bullard could immediately appeal as of right.2 The Court reasoned that, while confirmation of a plan can be said to fix the rights and obligations of the parties in a way that alters the status quo, d
In a battle over proper venue for the chapter 11 cases of In re Caesars Entertainment Operating Company, Inc.
On October 29, 2014, the United States Court of Appeals for the Second Circuit affirmed the decision of the District Court for the Southern District of New York dismissing as equitably moot appeals filed by three individuals (the “Appellants”) in the chapter 11 case of In re BGI Inc. f/k/a Borders Group, Inc.