Client Alert

The United States District Court for the Southern District of New York recently affirmed the Bankruptcy Court’s decision in In MPM Silicones, LLC, establishing Judge Drain’s “prime plus” formula as the appropriate interest rate required in connection with new notes issued to secured creditors under a cramdown plan of reorganization in the Southern District of New York.

This decision will likely have significantly negative consequences for secured creditors’ future recoveries. At a minimum, it will likely severely lessen secured creditors’ bargaining power in negotiating their treatment under plans of reorganizations. Given such potential harmful effects, all secured creditors should understand the implications of this decision.

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