On January 17, 2017, the Court of Appeals for the Second Circuit issued its long-anticipated opinion in Marblegate Asset Management, LLC v. Education Management Finance Corp., 1 ruling that Section 316(b) of the Trust Indenture Act of 1939, 15 U.S.C. § 77ppp(b) (the “Act”), prohibits only non-consensual amendments to core payment terms of bond indentures.

Parent company guarantees and performance bonds are typically used in the construction and engineering industries to provide a developer with some security in the event that the contractor breaches the building or engineering contract or, in some circumstances, upon the contractor's insolvency.

In the current economic climate, contractor default is, unfortunately, even more prevalent in the construction and engineering industries, and so the issues surrounding parent company guarantees and performance bonds are very much in focus for developers.

Two decisions (one only weeks ago) have held that the scope of Bankruptcy Rule 2019 encompasses “informal committees” of bondholders and that such committees must comply with the extensive disclosure requirements of Bankruptcy Rule 2019.1 In a recent decision, Bankruptcy Judge Christopher Sontchi of the Delaware Bankruptcy Court came out the other way, ruling that such a committee was not a “committee representing more than one creditor” and, consequently, is not subject to Rule 2019.2 In so doing, Judge Sontchi considered but declined to follow the two decisions addressing the same issue:

Charter Communications stepped closer to emerging from Chapter 11 protection as a New York bankruptcy judge approved the company’s pre-arranged plan of reorganization on Tuesday. Based in St. Louis, Charter ranks as the nation’s fourth largest cable system operator with 4.9 million subscribers across 27 states. Straining under a debt load of $21.7 billion, Charter filed for bankruptcy protection in March after bondholders in possession of $8 billion of the company’s debt agreed to exchange their debt for equity in the reorganized entity. The plan endorsed by U.S.

Fulfilling the terms of an agreement reached with bondholders in February, Charter Communications submitted a petition for Chapter 11 protection last Friday to the U.S. Bankruptcy Court for the Southern District of New York. The bankruptcy petition would restructure a portion of the debt owed by St. Louis-based Charter, the nation’s fourth largest cable operator with more than 5.5 million subscribers. At the end of last year, Charter listed total debt obligations of $21.7 billion with annual interest costs approaching $2 billion.

Nortel Networks Corp. of Canada, one of the world’s leading suppliers of fixed line phone network equipment, filed for protection from creditors Wednesday under Chapter 11 of the U.S. Bankruptcy Code. A pioneer in the development of network switches, routers, and fiber-optic technologies used by many of the world’s top telecommunications carriers, Nortel ranked as Canada’s largest company by value at the height of the global telecom market boom of the late 1990s and early 2000s.

On Monday, U.S. District Court Judge Shira Scheindlin lifted a hold on a bankruptcy court order approving Adelphia Communications’ Chapter 11 reorganization plan, thereby enabling Time Warner Cable (TWC) to proceed Tuesday with plans to transform itself into a publicly-traded company. Although U.S. Bankruptcy Court Judge Robert Gerber signed off on Adelphia’s reorganization plan on January 3, Scheindlin—at the behest of bondholders who objected to the plan—had blocked implementation pending review of the bondholders’ claims.