Recovery of Make-Whole Premiums in Bankruptcy After Momentive Performance and Energy Future Holdings

Navigating Varying Court Interpretations of Prepayment Premium Provisions; Guidance for Drafting Loan Documents and Indentures

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

Conducted on Tuesday, May 3, 2016

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will provide bankruptcy and lender counsel with a review of the Momentive Performance (MPM Silicones) and Energy Future Holdings rulings, highlighting emerging theories regarding both enforceability of make-whole provisions in bankruptcy loan agreements and protection of entitlement to make-whole premiums.


Make-whole provisions, or yield premiums, protect the noteholder’s right to interest payments by prohibiting early repayment or requiring compensation for the lost interest incurred by an early repayment. The enforceability of make-whole provisions within bankruptcy is uncertain depending on varying court approaches, despite such clauses being routinely upheld outside of bankruptcy proceedings. Courts have relied on contractual language or viewed premiums as liquidated damages, penalties or immature interest.

In denying the noteholders’ make-whole claims, the New York Bankruptcy Court in In re MPM Silicones L.L.C. held that a lender is not allowed a make-whole premium upon accelerating the loan unless the loan agreement explicitly provided for payment of the premium upon acceleration. Subsequently, the Delaware Bankruptcy Court adopted a similar holding in the high-profile case In re Energy Future Holdings Corp., providing clearer guidance on the level of precision required when drafting these provisions.

As courts have focused either on clear, unambiguous drafting of these provisions or instead on conditional language triggering a repayment activity, counsel must examine rulings in the applicable jurisdiction and carefully craft provisions to maximize potential for enforceability.

Listen as our authoritative panel analyzes various theories employed by bankruptcy courts, reviews Momentive Performance and Energy Future Holdings bankruptcy litigation rulings, and offers best practices for lenders to protect their entitlement to make-whole premiums.



  1. Differing approaches taken by bankruptcy courts in analyzing enforceability of these provisions
  2. Momentive Performance and Energy Future Holdings guidance on enforceability of make-whole provisions
  3. Best practices for lenders and bondholders to protect their entitlement to make-whole premiums


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 are best practices for counsel to lenders and bondholders to protect entitlement to make-whole premiums?
  • What lessons can you take from the Momentive Performance and Energy Future Holdings bankruptcy litigation rulings?


Melinda Franek
Melinda Franek
Vice President & Deputy General Counsel
CNH Partners

Ms. Franek is VP and Senior Counsel at CNH Partners, the arbitrage affiliate of AQR Capital Management. In this role,...  |  Read More

Jennifer Harris
Jennifer Harris

Special Counsel
Milbank Tweed Hadley & McCloy

Ms. Harris’s practice focuses on finance transactions, including structured financings, secured lending, and debt...  |  Read More

Melainie K. Mansfield
Melainie K. Mansfield

Milbank Tweed Hadley & McCloy

Ms. Mansfield represents investment funds, borrowers, arrangers and bank lenders. Her practice focuses on secured...  |  Read More

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