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Challenges to Reinstatement of Debt under Young Broadcasting
De-acceleration or reinstatement of debt under ' 1124(2) of the Bankruptcy Code has long been an option available to debtors. However, to be worthwhile of pursuit, certain conditions must generally exist: namely, a period of easy credit and favorable loans and low interest rates followed by a period of very tight and scarce credit and high interest rates. Under these conditions, a loan agreement containing terms and interest rates much more favorable than present market conditions may be a valuable asset of a debtor that is worth preserving through reinstatement under ' 1124(2).
In 2009, as credit markets around the world tightened, these conditions came together, and reinstatement plans returned to the bankruptcy professional's toolkit. Charter Communications, for example, commenced its Chapter 11 cases in March 2009 and sought and obtained, over the objection of various lenders, confirmation of an ambitious plan of reorganization that reinstated $11.4 billion in secured debt. See JP Morgan Chase Bank, N.A. v. Charter Commc'ns Operating, LLC (In re Charter Commc'ns), 419 B.R. 221 (Bankr. S.D.N.Y. 2009). Three months after Charter commenced its Chapter 11 cases, Young Broadcasting commenced its Chapter 11 cases, also in the S.D.N.Y., and proposed a Charter-like reinstatement plan. And while both cases focused upon whether the proposed reinstatement would trigger change-in-control provisions in the relevant credit documents, there were facts present in the Young Broadcasting case that distinguished it from Charter. As a result, the Young Broadcasting bankruptcy court sustained the objections of the senior secured lenders and denied the reinstatement plan. See In re Young Broadcasting, Inc., 2010 Bankr. LEXIS 1073 (Bankr. S.D.N.Y. Apr. 19, 2010).
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