Lender Recovery in Bankruptcy: Pre-Petition Default Interest, Pre-Payment Penalties, Late Fees, OID, Attorney Fees

Maximizing Recovery of Secured Lender's Remedies in the Loan Documentation

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, June 17, 2015

Recorded event now available

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Program Materials

This CLE webinar will provide bankruptcy and lender counsel a review of emerging theories regarding a lender’s right to recover pre-petition default interest, late fees, pre-payment penalties, original issue discount (OID) and attorney fees in bankruptcy, and review the bankruptcy case law developments. The panel will outline steps counsel to lenders can take to protect entitlement to the full array of interest, fees and other lender remedies in the credit agreement. 

Description

Holders of secured claims focus not only on the recovery of principal but also on repayment of pre-petition interest, late fees, pre-payment premiums, OID and attorney fees that are provided as remedies in the loan agreement.

Case law on the enforceability of make-whole premiums in bankruptcy varies with courts employing several different approaches to analyzing these premiums: reliance on contractual language, or looking at premiums as liquidated damages, penalties or unmatured interest. The Momentive Performance ruling unnerved distressed debt investors when the court denied noteholders’ claims for make-whole payments.

Whether secured creditors may recover pre-petition default interest depends on several factors, including the language in the loan agreement, the value of the collateral, and the nature of the default. An oversecured creditor is entitled to payment of either default interest or late charges, but not both.

There had been some uncertainty regarding the treatment of OID generated from a prior debt-for-debt exchange. A New York Bankruptcy Court has held that OID from a fair market value exchange is an allowable claim.

Listen as our authoritative panel analyzes various theories employed by bankruptcy courts in considering the enforceability of make-whole provisions and a lender’s right to recover pre-petition interest, late fees, OID and attorney fees. The panel will review recent bankruptcy case law developments, and offer best practices for lenders to protect these claims.

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Outline

  1. Pre-petition default interest
  2. Pre-payment or make-whole penalties
  3. Late fees
  4. OID
  5. Attorney fees

Benefits

The panel will review these and other key issues:

  • What factors do bankruptcy courts consider in analyzing the enforceability of make-whole provisions in loan agreements?
  • What impact has the Momentive Performance case had on the enforceability of make-whole premiums?
  • What factors will courts consider in awarding secured lenders pre-petition default interest?
  • Is OID an allowable claim in bankruptcy?

Faculty

Michael J. Riela
Michael J. Riela

Shareholder
Vedder Price

Mr. Riela focuses his practice on all aspects of bankruptcy and out-of-court workouts. He acts on behalf of banks,...  |  Read More

Dustin P. Smith, Esq.
Dustin P. Smith, Esq.

Hughes Hubbard & Reed

Mr. Smith represents companies restructuring their financial affairs both in and out of court as well as representing...  |  Read More

Kevin Walsh
Kevin Walsh

Member
Mintz Levin Cohn Ferris Glovsky and Popeo

Mr. Walsh’s practice focuses on all aspects of bankruptcy and commercial law, workouts, restructurings, and...  |  Read More

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