March 29, 2017

Out-of-Court Restructurings After Marblegate: Trust Indenture Act Section 316(b) & Beyond


Jim Millar spoke on a panel titled, “Out-of-Court Restructurings After Marblegate: Trust Indenture Act Section 316(b) & Beyond” on March 29, 2017, hosted by Drinker Biddle, DavisPolk, WilmerHale and Reorg Research.

The Second Circuit’s decision in Marblegate appears to have ended the “resurgence” of Trust Indenture Act (TIA) Section 316(b) as a tool for minority bondholders to challenge out-of-court restructurings. Recent cases had brought Section 316(b) from a long period of latency to the forefront of restructuring negotiations and litigation. But now, after Marblegate, issuers and bondholders are left to consider the breadth of the Marblegate decision and whether TIA Section 316(b)—or another mechanism—remains available to prevent certain types of non-bankruptcy bond restructurings.

The panelists discussed the policy rationale for Section 316(b) of the TIA, how the statute might best serve the capital markets, the practical application of 316(b) for market participants after the Second Circuit’s ruling, and the prospect for the legal landscape to change in the near future. Of particular note, the panelists discussed how guarantees of bonds may be treated independently from the underlying bond under the TIA and how the Second Circuit’s decision may increase involuntary chapter 11 cases and fraudulent transfer actions against issuers. Also discussed were the effects that the decision may have on legal opinions and on the role of indenture trustees.

Jim was joined on the panel by:

  • Mark J. Roe, David Berg Professor of Law, Harvard Law School
  • Byron B. Rooney, Partner, Davis Polk, Capital Markets
  • George W. Shuster Jr., Partner, WilmerHale, Bankruptcy and Financial Restructuring
  • Jude M. Gorman, General Counsel, Reorg Research (Moderator)

Watch a video recording of the panel discussion.

Read Drinker Biddle's alert "Marblegate v. EDMC: What does the Second Circuit's Opinion Say (and Not Say) About Releasing a Guarantee?"

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