Virtually all public indentures contain provisions allowing the issuer to cure ambiguities and make other technical changes to the debt documentation without debtholder consent. When the purported ambiguities have substantive consequences, however, issuers may not be able to get away with an amendment that lacks debtholder approval. InGSO Coastline Credit Partners L.P. v. Global A&T Electronics Ltd. (NY App. Div. 1st Dept. May 3, 2016), a New York lower court bought into a “cure of ambiguity” argument and on that basis granted a motion to dismiss.

The Bottom Line:

Survival  

Debt maturity profile Companies should ensure that they have a very clear understanding of the timing of their cash needs and in particular of the maturity profile of their debt – when does debt fall due and when will refinancing be required?  

Introduction

The United States Bankruptcy Court for the Southern District of New York ruled recently on the validity of “gift plans” – plans of reorganization under which a senior creditor “gifts” assets to a junior creditor or equity holder.1 In In re Journal Register Co.,2 Bankruptcy Judge Alan L. Gropper approved a plan in which secured lenders gifted a portion of their recovery to certain trade creditors, and detailed some of the important limitations on gift plans.

Evolution of the Gift Plan Doctrine

On December 15, 2009, the Court of Appeals for the Third Circuit heard oral argument in a closely-watched bankruptcy appeal stemming from the In re Philadelphia Newspapers, LLC chapter 11 case pending in the United States Bankruptcy Court for the Eastern District of Pennsylvania. At issue in the appeal is the right of a secured creditor of a chapter 11 debtor to credit bid its secured claims, when the debtor proposes to sell the collateral to a third party, “free and clear” of the creditor’s lien, pursuant to a non-consensual (i.e., “cramdown”) plan of reorganization.

The current economic recession has, not surprisingly, led to a significant downturn in the domestic gaming industry. During 2008, revenue growth in the U.S. gaming industry turned negative for the first time in four years. Data for the first quarter of 2009 indicate that the monthly gaming revenues of casinos in Las Vegas and Atlantic City declined more than 15% as compared to the first quarter of last year.1 Public gaming company stock prices are down more than 80% on average, and many gaming companies have postponed or canceled development projects.

Our May 11th memo entitled “General Growth Properties Bankruptcy Court Defers Final Ruling on Cash Collateral, Cash Management and DIP Financing Issues” concluded that the ultimate impact of the bankruptcy filings of General Growth Properties, Inc. and its affiliates would depend in large part on how the cash collateral and DIP Loan issues were resolved. On May 13th, Judge Allan L. Gropper, the U.S. Bankruptcy Judge before whom these bankruptcies are pending, entered final orders on the pending cash collateral, cash management and debtor-in-possession financing motions.

In In re Entringer Bakeries, Inc.,1 the United States Court of Appeals for the Fifth Circuit affirmed the viability of the “earmarking doctrine” as a judicially-created defense to a preference action under section 547(b) of the Bankruptcy Code.

Introduction

A recent decision of the United States Bankruptcy Court for the Southern District of New York underscores the risk to junior creditors of not understanding fully the scope of consent given to a senior creditor to modify its senior lending arrangements with a debtor under the terms of an intercreditor agreement. In Buena Vista Home Entertainment, Inc. v.