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Make-Whole Update: Delaware District Court Follows New York’s Lead in Disallowing Make-Whole Premium in Bankruptcy — Dispute Moves to Third Circuit

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February 29, 2016

Client Alert
On February 16, 2016, the District Court for the District of Delaware affirmed the decision of the Delaware bankruptcy court in In re Energy Future Holdings Corp., that noteholders’ claims for make-whole premiums may be blocked by the automatic stay of the U.S. Bankruptcy Code. As previously discussed in Chapman and Cutler’s July 23, 2015 Client Alert analyzing the Bankruptcy Court’s decision, courts have been requiring clear and unambiguous language in credit documents before awarding noteholders any amounts on account of a make-whole premium or other similar liquidated damages provisions upon a debt prepayment. The District Court’s decision follows this trend. The noteholders have now appealed the District Court’s decision and the U.S. Circuit Court for the Third Circuit has now been tasked with deciding the issue. 

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