A federal appeals court upheld the chapter 11 restructuring of Windstream Holdings Inc., finding bondholder complaints about the debt-cutting plan moot because reversing it would mean unwinding transactions that have already taken place, WSJ Pro Bankruptcy reported. The U.S. Court of Appeals for the Second Circuit in New York backed the telecommunications company’s 2020 restructuring, which put Elliott Management Corp. and other senior creditors in control of the business while wiping out junior bondholders owed roughly $2.4 billion. The appeals court found bondholders’ appeal to be equitably moot because they didn’t do enough to prevent the bankruptcy plan from taking effect. Equitable mootness is a judge-made doctrine that protects chapter 11 plans from being unwound if doing so would affect innocent market participants that relied on it. The bondholder trustee, U.S. Bank NA, used its appeal to argue for limiting the doctrine of equitable mootness, saying it contravenes federal courts’ obligation to exercise jurisdiction over disputes stemming from corporate bankruptcy plans. But the trustee “has not suggested any principled rule by which we should limit the doctrine or determine when its application is overbroad,” the Second Circuit said. “U.S. Bank appears instead to invite us to carve out the facts of this case ad hoc. We must decline this invitation.”
