Parting company with decisions from New York, the Third Circuit in Philadelphia reversed the lower courts in Delaware and ruled that so-called make-whole premiums must be paid to bondholders, at least when prepayment is voluntary in chapter 11 and the language of the indenture is not to the contrary, according to an analysis today in Rochelle’s Daily Wire. In a Nov. 17 decision in the wake of the reorganization of electric energy giant Energy Future Holdings Corp., the Third Circuit distinguished a Second Circuit decision and eviscerated a New York bankruptcy court opinion that favored large corporate debtors by holding that make-whole premiums are not owing if the debt was automatically accelerated by a bankruptcy filing. Immediately after the chapter 11 filing in Delaware, Energy Future refinanced the debt with court approval, leaving open the question of whether make-whole premiums were owing. Later, the bankruptcy court ruled that the premiums were not owing. The decisions by the bankruptcy court were upheld this year by a district judge in Delaware. Read more.
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!
