What's in a Name? Court Holds That Despite Its Title, a Security Agreement Also Subordinated Junior Creditor's Rights to Payment
Cadwalader, Wickersham & Taft LLP on 12/1/2021
On October 29, 2021, Judge Laura Taylor Swain, the presiding judge in the Puerto Rico bankruptcy case, ruled that approximately $2 billion in intragovernmental loan claims were subordinated to bonds issued by the Puerto Rico...more
Business Restructuring Review | July-August 2021
Jones Day on 7/23/2021
Chapter 15 Update: U.S. Bankruptcy Court Refuses To Enforce Order Approving Indonesian Debt Restructuring Plan Due To Third-party Releases - Cross-border bankruptcy cases filed in the U.S. under chapter 15 of the...more
Voting Right Assignment Unenforceable, But Subordinated Creditor Lacked Standing to Participate in Chapter 11 Plan Confirmation...
In In re Fencepost Productions Inc., 2021 WL 1259691 (Bankr. D. Kan. Mar. 31, 2021), the U.S. Bankruptcy Court for the District of Kansas recently addressed the enforceability of a provision in a pre-bankruptcy subordination...more
Out-of-the-Money Junior Creditors Cannot Participate in the Bankruptcy Process
Morgan Lewis on 6/8/2021
Subordination agreements are generally enforced in accordance with applicable non-bankruptcy law in bankruptcy cases. The decision in In re Fencepost Productions, Inc., No. 19-41542, 2021 WL 1259691 (Bankr. D. Kan. Mar. 31,...more
Demystifying the Commercial Lease–Subordination, Non-Disturbance, and Attornment Agreements
Whitman Legal Solutions, LLC on 3/29/2021
Many legal contracts operate like coordinate harmony. The parties have different roles, but each is equally important to the transaction. Differences in bargaining power may allow one party to have the upper hand, but both...more
A New Standard For Chapter 11 Cramdown Plans – The Third Circuit Court Of Appeal's Refusal To Strictly Enforce Subordination...
Fox Rothschild LLP on 3/15/2021
The Bankruptcy Code provides that subordination agreements are enforceable in bankruptcy to the same extent that such agreements are enforceable under non-bankruptcy law. 11 U.S.C. § 510(a). However, Section 1129(b)(1) of...more
Subordination Agreements and Cramdown — Strict Enforcement or Rough Justice?
Kramer Levin Naftalis & Frankel LLP on 10/9/2020
In the latest decision arising out of long-running disputes over confirmation of the Tribune Company's Chapter 11 plan, the Third Circuit issued important new guidance concerning the enforceability of subordination agreements...more
Third Circuit Favors Cramdown's 'Flexibility' and 'Rough Justice' Over Strict Enforcement of Subordination Agreements
Arent Fox on 10/2/2020
Eight years after the Delaware bankruptcy court confirmed the chapter 11 plan of Tribune Company and its affiliates, the United States Court of Appeals for the Third Circuit (the Court) affirmed the bankruptcy court's...more
Third Circuit Upholds Cramdown, Downplays Subordination Agreement
Mintz - Bankruptcy & Restructuring Viewpoints on 9/9/2020
The U.S. Court of Appeals for the Third Circuit recently confirmed that bankruptcy plans need not always recognize subordination agreements among creditors. The Tribune Company was the largest media conglomerate in the...more
Rough Justice: Third Circuit Issues Important Decision on Unfair Discrimination
Patterson Belknap Webb & Tyler LLP on 9/4/2020
"Unfair discrimination is rough justice. It exemplifies the Code's tendency to replace stringent requirements with more flexible tests that increase the likelihood that a plan can be negotiated and confirmed," announced Judge...more
Subordination Agreement Ignored in a Cramdown — But What's So Unfair About That?
Dechert LLP on 9/1/2020
Recently, in In re Tribune Company, the Third Circuit affirmed that the Bankruptcy Code means exactly what it says and that the enforcement of subordination agreements can be abridged when cramming down confirmation of a...more
Automatic Subordination Clauses
Lowndes on 8/26/2020
Most Leases contain what are called automatic subordination clauses, pursuant to which the Tenant agrees that the Lease is subordinate to any Mortgages granted by the Landlord, whether they are already in existence when the...more
Tennessee Enacts New Construction Legislation in 2020
Bass, Berry & Sims PLC on 7/29/2020
The Tennessee Construction Industry Payment Protection Act was signed into law on June 22. The Act addresses or reallocates certain risks associated with non-payment on construction projects under Tennessee's Prompt Pay Act...more
Rock, Paper, Scissors: Virginia Supreme Court Adopts Partial Subordination Rule to Interpret Subordination Agreements
Rosenberg Martin Greenberg LLP on 2/12/2020
Everyone is familiar with the "Rock, Paper, Scissors" method of resolving disputes where scissors cut paper, paper covers rock, and rock breaks scissors. In Futuri Real Estate, Inc. v. Atlantic Trustee Services, the Virginia...more
Partial Subordination: A Circuitous Route to a Fair Result
Williams Mullen on 2/4/2020
In Futuri Real Estate, Inc. v. Atlantic Trustee Servs., LLC, borrowers Milton and Armida Cortez (the "Borrowers") obtained three loans secured by separate deeds of trust on their residence: (A) a $415,000 deed of trust in...more
Chapter 11 Plan Distributions Are Not Collateral Covered by Intercreditor Agreement's Waterfall Provision
In In re Energy Future Holdings Corp., 2019 WL 2535700 (3d Cir. June 19, 2019), a panel of the U.S. Court of Appeals for the Third Circuit ruled that adequate protection payments made during a bankruptcy case and...more
Third Circuit's EFH Decision Is Another Blow to Senior Secured Creditors Attempting to Enforce Subordination Agreements
Nelson Mullins Riley & Scarborough LLP on 8/7/2019
Earlier this year, the United States Bankruptcy Court for the Southern District of New York issued an opinion in BOKF NA v. Wilmington Sav. Fund Soc'y FSB (In re MPM Silicones LLC), Case No. 15-2280, 2019 WL 121003 (S.D.N.Y....more
Stuck in the Middle of the Cap Stack: Intercreditor and Subordination Agreements in Mezzanine Financings
Below is an overview of the key terms and provisions in intercreditor/subordination agreements governing the relationship between a senior secured lender (the "Senior Lender") and a mezzanine lender (the "Mezz Lender")....more
Newsflash: Subordination Agreement prevents Rule 2004 examination
Dechert LLP on 4/18/2019
Bankruptcy Rule 2004 allows the examination of any entity with respect to various topics, including conduct and financial condition of the debtor and any matter that may affect the administration of the estate. Does a...more
Subordination Agreement Barred Bankruptcy Discovery Concerning Senior Debt
In In re Argon Credit, LLC, 2019 WL 169315 (Bankr. N.D. Ill. Jan. 10, 2019), the U.S. Bankruptcy Court for the Northern District of Illinois ruled that, in accordance with section 510(a) of the Bankruptcy Code, a standby...more
Court rules subordination agreement bars junior creditor from obtaining discovery from senior creditor
Thompson Coburn LLP on 1/16/2019
In a recent decision, the U.S. Bankruptcy Court in the Northern District of Illinois strictly enforced a subordination agreement to prevent the junior lienholder from even obtaining discovery from the senior creditor. In re...more
District Court Holds That Receipt of Reorganized Stock Did Not Violate Turnover and Standstill Provisions in Intercreditor...
Cadwalader, Wickersham & Taft LLP on 12/21/2018
On November 30, 2018, Judge Nelson S. Román of the United States District Court for the Southern District of New York issued a decision affirming the dismissal of certain claims brought by senior secured creditors against...more
Delaware District Court Holds That a $30 Million Haircut Is Not Unfair Discrimination in a Cramdown Plan
Kramer Levin Naftalis & Frankel LLP on 8/28/2018
After the Third Circuit found that the appeal of confirmation of the Tribune Plan by two senior notes trustees was not equitably moot, Judge Sleet of the Delaware District Court held that the Tribune Plan's failure to...more
The Devil's Dictionary of Bankruptcy Terms: Intercreditor Agreement
Polsinelli on 12/21/2017
The "Devil's Dictionary" is a quick-reference guide for commercial lenders and other restructuring professionals. In this series, we highlight many of the buzz words found in the Dictionary and used in today's bankruptcy...more
The Impact of Subordination Agreements on Lien Priorities
Stinson LLP on 11/27/2017
The Colorado Court of Appeals recently decided a question of first impression in Colorado concerning the effect of a subordination agreement on lien priorities. Specifically, the Court had to determine whether to apply the...more
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