Happy 2022, everyone! It seems fitting to kick off our Make (Whole) a Minute Update series in 2022 with an alert on make-whole. On December 22, 2021, the Bankruptcy Court for the District of Delaware ruled in favor of the Debtor-Hertz on a Motion to Dismiss filed by Debtor-Hertz with respect to make-whole claims and post-petition interest claims filed by public bondholders, with respect to four different series of bonds. In keeping with our theme that it takes about a minute to read our updates, here are the takeaways on the Hertz decision for institutional investors:

Sounds like an odd combination—enforceability of make-whole and post-petition interest and patent law. It is. But relevant nonetheless. Recall that a key argument in the ongoing Ultra Petroleum dispute regarding the noteholders’ entitlement to make-whole and post-petition interest is the existence of the Solvent Debtor Rule. The Solvent Debtor Rule is a judicially created exception to the prohibition on claims for post-petition interest by unsecured creditors in bankruptcy.

Welcome to the first Akin Gump client alert sub-titled Make (Whole) a Minute. These alerts are designed to be short digestible updates or commentaries on topics of interest to the institutional investment community that take a minute (or two) to read. And who doesn’t love Make-Whole and a good play on words?

Pension issues in the American Airlines (AMR) bankruptcy¹ have resulted in the Internal Revenue Service (IRS) issuing new final regulations, effective November 8, 2012 (Final Regulations), which broadly impact all debtors facing underfunded pension plan obligations. The Final Regulations provide chapter 11 bankruptcy debtors facing distress terminations of their tax-qualified defined benefit pension plans with the additional option of amending the plans to eliminate accelerated payment options.

The term “frenemy” – a combination of the words friend and enemy – has emerged from modern vernacular to describe someone who is simultaneously a partner and an adversary. The term is perhaps perfectly emblematic of the restructuring process where various constituents make and break alliances in an effort to steer the restructuring process. In so doing, the lines between friend and enemy are often blurred or altered during the course of the restructuring.

In Ogle v. Fidelity & Deposit Co. of Maryland, 586 F.3d 143 (2d Cir. 2009), the Second Circuit has now become the second circuit court of appeals to recently conclude that general unsecured creditors may include postpetition attorneys’ fees as part of their claim when attorneys’ fees are permitted by contract or applicable state law.11

Although courts are generally reluctant to equitably subordinate claims of non-insiders, the United States Bankruptcy Court for the District of Montana recently did just that to the claims of a non-insider lender based on overreaching and self-serving conduct in Credit Suisse v. Official Committee of Unsecured Creditors (In Re Yellowstone Mt. Club, LLC), Case No. 08-61570-11, Adv. No. 09-00014 (Bankr. D. Mont. May 13, 2009).