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Chemtura: 'Make-Whole' and 'No-Call' Provisions

By Edward E. Neiger and Marianna Udem

The Bankruptcy Court for the Southern District of New York's recent decision in In re Chemtura Corp., 439 B.R. 561 (Bankr. S.D.N.Y. 2010) (“Chemtura“) examines the treatment of “make-whole” and “no-call” provisions in bankruptcy proceedings in the context of a settlement of such claims pursuant to a plan or reorganization. Generally, a “no-call” provision prohibits the prepayment of debt prior to maturity while a “make-whole” provision acts as a liquidated damages clause and provides a mechanism for determining what amount a debtor must pay in order to prepay its debt prior to maturity. Ultimately approving the settlement without deciding on the enforceability of claims for “make-whole” amounts and damages for breach of “no-call” provisions, the Chemtura court conducted a thorough examination of recent case law and provided a detailed roadmap of the analysis it would conduct should the issues be litigated.

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