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ARTICLE · 20 JULY 2015

Keeping Marblegate In Perspective: Implications For Debt Restructurings, Indenture Amendments And New Bond Issues

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Involuntary debt restructurings that have the effect of impairing a bondholder's right to receive payment may violate the Trust Indenture Act.

United StatesInsolvency/Bankruptcy/Re-Structuring
A&O Shearman
A&O Shearman
Jason Lehner
Jason Lehner
Fredric Sosnick
Fredric Sosnick
Antonia Stolper
Antonia Stolper
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Involuntary debt restructurings that have the effect of impairing a bondholder's right to receive payment may violate the Trust Indenture Act. This was recently held in the Marblegate/Education Management Corp. bondholder litigation. A first read of the case suggests potentially problematic implications. A deeper analysis shows a less troubling decision. The case is also relevant for the 144A for life market that is technically not subject to the statute.

  • Involuntary debt restructurings may violate the Trust Indenture Act if they have the effect of impairing a bondholder's right to receive payment, even though they leave that right formally intact. That was recently held by the court in the Marblegate/Education Management Corp. bondholder litigation. The SDNY's recent opinion on the merits (Marblegate II)1 confirmed its earlier holding on a request for a preliminary injunction to block the restructuring (Marblegate I)2.

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