Rejecting Market-Based Cramdown Interest Rates, and Making Words Count for Make-Whole Payments

    View Author December 2014
    The recent period of low interest rates has spurred many borrowers to use bankruptcy to refinance their high-interest debt. Sometimes, these efforts conflict with loan document provisions requiring borrowers to pay so-called “make-whole premiums” which are designed to compensate lenders for lost interest payments caused by early debt repayment. The US Bankruptcy Court for the Southern District of New York recently examined the enforceability of such make-whole provisions when the acceleration of debt is caused by a bankruptcy. This article, by Squire Patton Boggs partner Mark A. Salzberg and associate Peter R. Morrison, looks at the court’s analysis of the make-whole premiums, as well as the court’s ruling on the interest rate required in a chapter 11 cramdown.

    *This article is reprinted with permission of the publisher.