BarbriSFCourseDetails
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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Bankruptcy

Date & Time
  • event Date

    Tuesday, April 18, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE course will provide bankruptcy and lender counsel with a review of the Fifth Circuit's latest decision in In re Ultra Petroleum, 51 F.4th 138 (5th Cir. 2022), the Delaware Bankruptcy Court's decision in In re Hertz Corp., Adv. Proc. No. 21-50995 (Bankr. D. Del. Nov. 9, 2022), and the solvent debtor exception, highlighting widening conflicts in the relevant case law and emerging theories regarding both enforceability of make-whole and no-call provisions in bankruptcy loan agreements and protection of entitlement to make-whole premiums.

Faculty

Lucy F. Kweskin
Partner
Parent: Katten Muchin Rosenman Llp

Ms. Kweskin is a partner in Mayer Brown's New York office and a member of the Global Restructuring practice. She advises clients, with a special focus on lenders, on all stages of corporate restructurings (both in and out-of-court) with significant experience with forbearance agreements, foreclosures, restructuring support agreements, debtor-in-possession financing, 363 sales and chapter 11 plans. Ms. Kweskin frequently litigates bankruptcy-related disputes concerning valuation, make-whole claims, inter-creditor issues, fraudulent transfers, recharacterization, veil piercing, and breaches of fiduciary duty. In addition to lenders, she represents stakeholders across the capital structure including debtors, distressed acquirers, official committees of unsecured creditors, litigation financiers and landlords.

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Ferve E. Khan
Counsel
BakerHostetler

Ms. Khan is a practiced bankruptcy litigator and transactional attorney who has extensive experience in large-scale liquidations and restructurings. She has represented creditors in complex Chapter 11 bankruptcy cases in industries such as retail, automotive, financial and professional services. She has also litigated a wide range of matters in Chapter 11 and SIPA cases. She actively publishes and speaks on cutting-edge legal developments in the restructuring field and is Co-Chair of the American Bankruptcy Institute Bankruptcy Litigation Committee.

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Description

Make-whole provisions, or yield premiums, are intended to protect the fixed-rate noteholder's rights by requiring compensation for the damage caused by the issuer's early payment in a lower-rate market. The circuits and lower courts are split about whether a prepayment premium, as a matter of law, is disallowable as "unmatured interest" under Section 502(b)(2). The issue varies in difficulty depending on the specific facts of a given case, and in part, it arises from ambiguous descriptions of what triggers the premium.

In In re Ultra Petroleum (2022), the Fifth Circuit held that a make-whole premium, as a matter of law, is generally disallowable as "unmatured interest," but that the solvent debtor exception may still require payment, and that a class of creditors holding make-whole premium rights may be denied those rights and stripped of a vote in Chapter 11 by "unimpairing" the class.

Ultra conflicts with Third and Second Circuit decisions: one upholding make-whole premiums and the other disallowing make-wholes when the specific language of the indenture did not require them, respectively. Trustees and noteholders will face increased uncertainty about the value and enforceability of make-whole claims as courts debate the nature of make-whole premiums as unmatured interest or liquidated damages.

Listen as our authoritative panel analyzes various theories employed by bankruptcy courts in considering the enforceability of make-whole provisions. The panel will review recent bankruptcy case law developments and offer best practices for lenders to protect these claims.

Outline

  1. General considerations and strategies
  2. Prioritizing what relief to request in First-Day motions
  3. Procedural and evidentiary considerations
  4. Selected First-Day motions
    1. First-Day declarations
    2. Debtor-in-possesion financing
    3. Cash collateral
    4. Wages and employee compensation
    5. Critical vendors
    6. Reclamation procedures
    7. Cross-border foreign representative orders

Benefits

The panel will review these and other key issues:

  • Will disallowance of make-whole claims under Section 502(b)(2) affect secured creditors' seeking make-whole payments pursuant to the exceptions under Section 506(b)?
  • What factors do bankruptcy courts consider in analyzing the enforceability of make-whole and no-call provisions in loan agreements?
  • Is the impairment aspect of the ruling consistent with the statute? Could it be subject to further challenge in other circuits?
  • What are best practices for counsel to lenders and bondholders to protect entitlement to make-whole premiums?
  • What lessons can you take from Ultra Petroleum and other bankruptcy rulings?