EFIH Secured Bondholders Win Make-Whole Appeal In Third Circuit

On Nov. 17, 2016, the United States Court of Appeals for the Third Circuit issued an important decision in favor of holders of more than $4 billion in secured first and second lien notes issued by Energy Future Intermediate Holding Co. LLC (EFIH), which unwillingly had their secured notes repaid ahead of schedule in bankruptcy without payment of the "make-whole" required under the indentures. In re Energy Futures Holding Co., No. 16-1351 (3d Cir. Nov. 17 2016). The decision, which reversed the bankruptcy and district courts and explicitly disagreed with another closely watched decision from the Southern District of New York, has important implications for borrowers and lenders grappling with refinancing in Chapter 11 cases. (Kramer Levin represents the EFIH second lien noteholders.)