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.
In a 2-1 opinion, the Second Circuit overruled the district court in Marblegate Asset Management LLC v. Education Management Corp., finding no violation of the Trust Indenture Act (“TIA”) in connection with an out-of-court debt restructuring.
Background
Labor Day weekend is generally anticipated as offering some final, end-of-summer respite. For the transportation community, however, this past Labor Day weekend (September 35, 2016) was anything but restful. Just before the start of the holiday weekend, Hanjin, Korea's largest containership company, commenced rehabilitation proceedings in South Korea. That proceeding essentially halted Hanjin's vessels bound for the U.S., thereby stranding millions of dollars of goods at sea, until Hanjin's bankruptcy was recognized by a U.S. court in a Chapter 15 bankruptcy proceeding.
On Jan. 17, the U.S. Court of Appeals for the Second Circuit vacated the decision of the District Court for the Southern District of New York in Marblegate Asset Management, LLC v.
On Jan. 17, 2017, in a closely watched dispute surrounding Section 316(b) of the Trust Indenture Act of 1939, the U.S. Court of Appeals for the Second Circuit issued its long-anticipated decision in Marblegate Asset Management, LLC v. Education Management Finance Corp. (the “Decision”).[1] In a 2-1 ruling reversing the District Court,[2] the Court of Appeals construed Section 316(b) narrowly, holding that it only prohibits “non-consensual amendments to an indenture’s core payment terms” and does not protect noteholders’ practical ability to receive payment.[3]
On January 17, the US Court of Appeals for the Second Circuit rendered a much anticipated decision in Marblegate Asset Management, LLC v. Education Management Corp., No. 15-2124-cv(L), 15-2141-cv(CON), reversing the Southern District of New York's holding that only a non-consensual amendment to an indenture's core payment terms violates Section 316(b) of the Trust Indenture Act (TIA).
In a recent ruling, the U.S. Court of Appeals for the Eleventh Circuit examined whether circuit courts have jurisdiction to hear direct appeals of unauthorized bankruptcy court orders that have not been reviewed by a district court. This was an issue of first impression in the Eleventh Circuit. The appellate court held that a bankruptcy court’s ruling in a non-core proceeding that has not been reviewed by the district court carries no adjudicative authority and is therefore not directly appealable to the circuit court.
The First Circuit Bankruptcy Appellate Panel recently issued a decision recognizing the rights of trademark licensees when the trademark’s owner files for bankruptcy.
Second Circuit’s reversal of controversial restructuring decision may boost confidence among distressed bond issuers.