A bankruptcy judge said higher courts or Congress should clarify whether solvent companies can pass through chapter 11 bankruptcy without paying prepayment premiums and contractual interest to bondholders, WSJ Pro Bankruptcy reported. Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del. said on Monday there is a higher likelihood the Supreme Court will weigh in if she elevated Hertz Global Holdings Inc.’s dispute with its bondholders directly to a Federal appellate court. Judge Walrath earlier this month rejected a request by a trustee for the Hertz bondholders to reconsider her 2021 ruling that had denied creditors the rights to interest payments at the contractual rate during bankruptcy. The trustee, Wells Fargo Bank N.A., had argued the car-rental company must pay $272 million including a make-whole premium and postbankruptcy interest at the contract rate. Hertz exited bankruptcy last year solvent, benefiting from surging prices for rental cars and used vehicles. The judge said earlier this month the best way may be to direct appeal to the Third Circuit. She said “this decision has to be decided by the Supreme Court or Congress.” In a written ruling on Monday, Judge Walrath clarified her earlier ruling and said Congress could have stated at the time it changed the bankruptcy code that a solvent debtor had to pay the contract rate of interest.
