Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistKickerFeaturesSectionsNewsLJN Newsletters

SDNY Bankruptcy Court Allows Unamortized Original Issue Discount As a Claim

By Michael J. Sage and James O. Moore

The Bankruptcy Court for the Southern District of New York (the bankruptcy court) recently held that unamortized interest associated with original issue discount (OID) originating from a fair market value exchange constitutes an allowed bankruptcy claim. While there was caselaw both in the Second and Fifth Circuits holding that a face value exchange does not generate new OID for the purposes of claim allowance under the Bankruptcy Code, until 2013, no court had yet decided the same question in the context of a fair market value exchange. When the issue squarely arose in the ResCap bankruptcy cases, the bankruptcy court considered the question as a matter of first impression and issued an opinion allowing the unamortized interest associated with OID claimed by ResCap's junior secured noteholders (the Holders). See Official Comm. of Unsecured Creditors v. UMB Bank (In re Residential Capital, LLC), 501 B.R. 549 (Bankr. S.D.N.Y. 2013) (the Opinion).

The OID ruling is just one component of the Opinion, which more generally established that the Holders' claims are undersecured and thus not entitled to postpetition interest and fees. This article, though, focuses on only the OID ruling aspect of the Opinion because it will have far reaching implications, especially in the pricing of other OID notes that are the product of fair market value exchanges.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers Image

There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.

Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Transfer Tax Implications on Real Property Leases Image

The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.