In the most significant decision of the decade on a matter of U.S. bankruptcy law, the U.S. Supreme Court rendered its highly anticipated decision in Harrington v. Purdue Pharma L.P., 603 U.S. ____ (2024) on June 27, 2024, striking down the non-consensual third party releases that were the cornerstone of Purdue Pharma's Chapter 11 Plan of Reorganization by a vote of 5-4. In doing so, the Court said:

On October 17, 2022, Justice Andrea Masley of the NY Supreme Court issued a decision and order denying all but one of the motion to dismiss claims filed by Boardriders, Oaktree Capital (an equity holder, term lender, and “Sponsor” under the credit agreement), and an ad hoc group of lenders (the “Participating Lenders”) that participated in an “uptiering” transaction that included new money investments and roll-ups of existing term loan debt into new priming debt that would sit at the top of the company’s capital structure.

On October 14, 2022, the Fifth Circuit issued its decision in Ultra Petroleum, granting favorable outcomes to “unimpaired” creditors that challenged the company’s plan of reorganization and argued for payment (i) of a ~$200 million make-whole and (ii) post-petition interest at the contractual rate, not the Federal Judgment Rate. At issue on appeal was the Chapter 11 plan proposed by the “massively solvent” debtors—Ultra Petroleum Corp. (HoldCo) and its affiliates, including subsidiary Ultra Resources, Inc.

On July 6, Delaware Bankruptcy Court Judge Craig T. Goldblatt issued a memorandum opinion in the bankruptcy cases of TPC Group, Inc., growing the corpus of recent court decisions tackling “uptiering” and other similar transactions that have been dubbed by some practitioners and investors as “creditor-on-creditor violence.” This topic has been a hot button issue for a few years, playing out in a number of high profile scenarios, from J.Crew and Travelport to Serta Simmons and TriMark, among others.

Third-party releases, particularly releases of non-debtor affiliated guarantors, are commonly a critical feature of a successful cross-border restructuring. In U.S. restructurings, where New York law typically governs the arrangements among a borrower, its lenders/noteholders and its guarantors, the restructuring or release of the primary obligor does not, without more, result in the restructuring or release of the guarantors’ obligations in respect of the guarantees. For this reason, in U.S.

The demand by asset managers, CLOs and other investors for leveraged loans continues to fuel the market for cov-lite loans that include other terms that are attractive for sponsors. These terms often allow for liability management transactions by permitting transfers of assets to unrestricted subsidiaries, or the non-pro rata uptiering of debt and incurrence of super-priority debt with mere majority lender consent.

COVID-19 Cuts a Harsh Path Through the Aviation Sector

On August 26, 2020, the Court of Appeals for the Third Circuit held that the Bankruptcy Code does not require subordination agreements to be strictly enforced in order for a court to confirm a cramdown plan, so long as the plan does not discriminate unfairly.

The COVID-19 pandemic has wreaked havoc on the global economy. The equity markets, the travel and tourism industry, and retail establishments of all stripes have been hit hard. In addition to manufacturing, shipping, and other operational and supply chain disruptions, companies will need to address their borrowing requirements. Likewise, lenders, bondholders and alternative capital providers will need to consider what their rights and obligations are under their financing documents.

On December 19, 2019, the Second Circuit held that appellants’ state law constructive fraudulent transfer claims were preempted by virtue of the Bankruptcy Code’s safe harbors that exempt transfers made in connection with a contract for the purchase, sale or loan of a security from being clawed back into the bankruptcy estate for