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Bankruptcy Commercial Law Creditors' and Debtors' Rights Litigation

Third Circuit Sides With Creditors in EFIH Make-Whole Dispute

At the end of last year, the Third Circuit added to several recent decisions addressing whether a creditor was entitled to payment of a "make- whole" premium in connection with a Chapter 11 case. The court's opinion is the most creditor-friendly decision issued to date on this topic.

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At the end of last year, the U.S. Court of Appeals for the Third Circuit added to several recent decisions addressing whether a creditor was entitled to payment of a “make- whole” premium in connection with a Chapter 11 case. See Delaware Trust Co. v. Energy Future Intermediate Holding Co. (In re Energy Future Holdings), 842 F.3d 247 (3d. Cir. 2016)). The Third Circuit’s opinion is the most creditor-friendly decision issued to date on this topic, as the court found that the refinancing of certain first- and second-lien notes after EFIH’s Chapter 11 cases triggered payment of a “make-whole” premium. Notably, the Third Circuit found that the ” make-whole” premium was payable despite the fact that the indentures governing the notes did not expressly provide for payment of the premium in the event of an EFIH bankruptcy.

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