Bankruptcy Judge Robert Drain’s ruling on Aug. 26 in the unrelated bankruptcy of chemical maker Momentive Performance Materials could end Energy Future's $1 billion battle with creditors and reinvigorate its restructuring, Reuters reported on Friday. The two cases are linked by disputes over “make-whole” provisions in bond contracts. Make-wholes are an early redemption payment to bondholders to compensate them for the loss of anticipated interest. Bondholders have become increasingly willing to fight for the make-whole payments in recent bankruptcies such as American Airlines in part because there are few places to invest their money to earn above-market returns given the current low-rate landscape. Energy Future filed one of the largest corporate bankruptcies in U.S. history in April with a plan that was premised in part on refinancing high-coupon secured bonds. Bondholders sued, arguing that the company was wrongfully denying them $1 billion in make-whole payments. Momentive proposed a plan that had similar elements, and last week Judge Drain swept aside objections from bondholders.
http://www.reuters.com/article/2014/09/05/us-energy-future-bankruptcy-a…
For further analysis of “make-whole” provisions and the effect of the Momentive Performance Materials decision, be sure to sign up for tomorrow’s abiLIVE webinar, “Understanding Make-Whole and No-Call Provisions: Key Takeaways from Recent Decisions.”
http://www.abiworld.org/webinars/2014/0909Web/index.html