Announcements
Nov. 17, 2016

Indenture Trustee and Second Lien Bondholders Win Make-Whole Appeal in EFIH Bankruptcy

The U.S. Court of Appeals for the Third Circuit on Nov. 17 ruled in favor of the indenture trustee and an ad hoc group of $2.2 billion of second lien notes issued by Energy Future Intermediate Holding Co. LLC (EFIH), reversing decisions by the Delaware Bankruptcy Court and United States District Court. The court held that EFIH, which made partial payment on the notes shortly after filing for bankruptcy, and is expected to pay off the remainder of the notes in connection with a plan of reorganization, must pay the premiums required for such early payment under the indentures. Disputes over make-wholes or yield maintenance programs in bankruptcy have been a major issue in recent years. This decision is expected to have wide-ranging impact.

“We have always maintained that if a borrower wants the right to pay off notes ahead of schedule in bankruptcy without paying a make-whole, this right needs to be set forth explicitly. We are gratified that the Third Circuit has agreed with us,” said Bankruptcy Litigation partner Gregory A. Horowitz. “This is an important decision that will provide invaluable guidance in the future.”

The Kramer Levin team was led by Bankruptcy Litigation partner Gregory A. Horowitz and Corporate Restructuring and Bankruptcy partner Joshua K. Brody. The team includes Corporate Restructuring and Bankruptcy partners Thomas Moers Mayer and Philip Bentley, associates Jennifer R. Sharret, Rachael Ringer and Andrew M. Dove, Litigation partner Jeffrey S. Trachtman and associate Noah Hertz-Bunzl.

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