Follow Us

Law.com Subscribers SAVE 30%

Call 855-808-4530 or email GroupSales@alm.com to receive your discount on a new subscription.

Bankruptcy Litigation

Caveat Intercreditor: Bankruptcy May Be Coming

Bankruptcy Provisions in First Lien/Second Lien Intercreditor Agreements

While intercreditor agreements (ICAs) are not necessarily the most attention-grabbing of the various loan documents common to large financing transactions, they are nevertheless important, and lack of attention to detail with respect to their provisions could lead to unintended results in any future bankruptcy case.

X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

While intercreditor agreements (ICAs) are not necessarily the most attention-grabbing of the various loan documents common to large financing transactions, they are nevertheless important, and lack of attention to detail with respect to their provisions could lead to unintended results in any future bankruptcy case. For example, in Momentive Performance Materials, Inc. v. BOKF, NA (In re MPM Silicones, L.L.C.) (MPM) –F.3d–, 2017 WL 4700314, Nos. 15-1682 (2nd Cir. Oct.20, 2017), and in In re Energy Future Holdings Corp., 842 F.3d 247 (3d Cir. 2016), the first lien creditors may have assumed that the second lien creditors had agreed to be subordinated and silent during bankruptcy, but the second lien lenders were nonetheless able to participate materially in those cases and to obtain value at the expense of senior creditors, primarily because the pertinent sections in the applicable ICAs were not sufficiently clear and explicit.

Read These Next