Federal Court Upholds Make-Whole Premium Payable To Secured Noteholders In Chapter 11 Bankruptcy

December 14, 2016 Corporate News Update: Federal Court Upholds Make-Whole Premium Payable to Secured Noteholders in Chapter 11 Bankruptcy, U.S. Securities Filings Start to Reflect Election-Related Risk Factors, and Patent Trial and Appeal Board Terminates Inter Partes Review Proceedings Between Microsoft and Enfish Resulting in Enfish Victory

This week's corporate news roundup includes the holding by a U.S. federal appeals court that secured indenture noteholders were entitled to a make-whole premium notwithstanding the issuer's chapter 11 bankruptcy case, the addition by companies in their securities filings with the SEC of risk factors relating to the outcome of the U.S. Presidential election, and the termination by the PTAB of IPR proceedings as to patent claims between Microsoft Corporation and Enfish LLC, resulting in a non-appealable win for Enfish.

FEDERAL COURT UPHOLDS PAYMENT OF MAKE-WHOLE PREMIUM TO SECURED NOTEHOLDERS

A federal appeals court recently held that first lien and second lien noteholders were entitled to a "make-whole" premium contained in the noteholders' indentures notwithstanding the issuer's Chapter 11 bankruptcy case. In doing so, the court reversed the lower court and reached a different conclusion that the holding in the conclusion in a 2015 decision by the Southern District of New York involving the bankruptcy of Momentive Performance Materials. In the 2015 case, the district court held that acceleration of the notes on bankruptcy was a prepayment, cutting off the right to the make-whole premium provided in the indentures. In the 2016 case, the appeals court found that the make whole premium was styled as a redemption (as opposed to a prepayment) and that New York law permitted redemption after maturity. As a result, it held that the acceleration clause in the first lien and second lien noteholder indentures did not obviate the noteholders' right to the make-whole premium. For more information on the In re Energy Future Holdings Corp. case, see http://www2.ca3.uscourts.gov/opinarch/161351p.pdf.

SEC FILINGS START TO ADD RISK FACTORS ASSOCIATED WITH ELECTION OF TRUMP AS U.S. PRESIDENT

Public companies have begun adding risk factors relating to the unexpected election of Donald Trump as U.S. President and the Republican party's strong Congressional majority. Risk factor disclosure relates to matters such as the climate of political uncertainty, the concern for the future of clean energy and climate change...