The Third Circuit ruled “that subordination agreements need not be strictly enforced for a court to confirm a cramdown plan,” according to an analysis in Rochelle’s Daily Wire today. The Third Circuit upheld rulings by the bankruptcy court and the district court in the mammoth reorganization of publisher Tribune Co. Senior noteholders, whose class voted against the chapter 11 plan, wanted the Third Circuit to enforce their contractual subordination rights to the letter. The appeals court declined the invitation. In his August 27 opinion, Circuit Judge Thomas L. Ambro said that the “unfair discrimination” provision in Section 1129(b)(1) is “rough justice.” It replaces “stringent requirements with more flexible tests that increase the likelihood that a plan can be negotiated and confirmed.”
