Make-Whole Provisions Still Enforceable After Momentive

A recent bankruptcy court decision from the Southern District of New York held that a make-whole premium in a loan agreement was enforceable against a bankrupt borrower, notwithstanding the U.S. Court of Appeals for the Second Circuit's 2017 decision in Momentive.

The bankruptcy court held that, while make-whole premiums contingent on "prepayment" of a loan are presumed not to be triggered by a payment after acceleration of the underlying debt, because such a payment is not a prepayment, parties can — and in this case, did — contract around that rule with clear and unambiguous language stating that the premium is payable even if the debt is paid before the original maturity date as the result of acceleration.