Introduction

Non-consensual third-party releases are provisions in reorganization plans that release non-debtor parties from liability to other non-debtor parties without the consent of all potential claimholders. These releases are frequently included in chapter 11 plans of reorganization. Most circuit courts allow these releases under certain circumstances; however, there is a split among circuit courts as to whether such non-consensual third-party releases are permitted by the Bankruptcy Code.

Introduction

Liability management exercises (“LMEs”) are increasing in the bond and capital market and are often used in relatively benign situations. They are certainly not always a precursor to a full-scale restructuring or insolvency.