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ARTICLE · 10 APRIL 2019

Make Whole Prepayment Premium Enforceable Even After Loan Acceleration

Hogan Lovells
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In In re 1141 Realty Owner LLC, et al., No. 18-12341 (SMB), 2019 WL 1270818 (Bankr. S.D.N.Y. March 18, 2019), Bankruptcy Judge Stuart M. Bernstein of the U.S

United StatesInsolvency/Bankruptcy/Re-Structuring
Ronald Silverman
Ronald Silverman
Sara Posner
Sara Posner

In In re 1141 Realty Owner LLC, et al., No. 18-12341 (SMB), 2019 WL 1270818 (Bankr. S.D.N.Y. March 18, 2019), Bankruptcy Judge Stuart M. Bernstein of the U.S. Bankruptcy Court of the Southern District of New York recently reaffirmed that upon sufficient contractual language, "make whole" prepayment premiums are enforceable under New York law even after loan acceleration. The court emphasized that the language of the contract provided for such a result and that this was an enforceable liquidated damages clause under New York law.

Prior to filing for Chapter 11, 1141 Realty Owner LLC, (the Debtor) received a notice of default and acceleration from Wilmington Trust NA (Wilmington). Wilmington demanded immediate repayment in full of the entire outstanding debt including all accrued interest and other payments due under the loan agreement.1 The contractual make whole prepayment premium provision stated that any payment following an event of default was deemed a "voluntary

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