Treatment of Make-Whole and No-Call Provisions in Bankruptcy

Navigating the Circuits on Prepayment Premium Provisions; Guidance for Drafting Loan Documents and Indentures

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

Conducted on Wednesday, July 15, 2020

Recorded event now available

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Program Materials

This CLE webinar will provide bankruptcy and lender counsel with a review of the In re Ultra Petroleum case from the Fifth Circuit, highlighting conflicts in the relevant case law and emerging theories regarding both enforceability of make-whole and no-call provisions in bankruptcy loan agreements and protection of entitlement to make-whole premiums.


Make-whole provisions, or yield premiums, are intended to protect the fixed-rate noteholder's rights by requiring compensation for the damage caused by the issuer's early payment in a lower-rate market. The circuits and lower courts are split about whether a prepayment premium, as a matter of law, is disallowable as "unmatured interest" under Section 502(b)(2). The issue varies in difficulty depending on the specific facts of a given case, and in part, it arises from ambiguous descriptions of what triggers the premium.

In 2018, the U.S. Supreme Court declined to review a case addressing alleged ambiguity in the text of a clause. Then, a Fifth Circuit panel issued a series of debtor-friendly rulings in a case involving no such textual ambiguity: In re Ultra Petroleum (2019). In Ultra, the Fifth Circuit held that a make-whole premium, as a matter of law, is disallowable as "unmatured interest," that a class of creditors holding make-whole premium rights may be denied those rights and stripped of a vote in Chapter 11 by "unimpairing" the class and remanded to the Bankruptcy Court.

The Fifth Circuit en banc withdrew the decision and issued a new opinion in November 2019. As with the original opinion, the revised opinion followed the Third Circuit in holding that a claim altered by operation of law under the Bankruptcy Code is not "impaired" under Section 1124(1). However, it withdrew guidance about the fate of make-whole claims under 11 U.S.C. 502(b)(2), the solvent debtor exception, and other matters, and these questions remain unanswered.

Listen as our authoritative panel analyzes various theories employed by bankruptcy courts in considering the enforceability of make-whole provisions. The panel will review recent bankruptcy case law developments and offer best practices for lenders to protect these claims.



  1. Overview
  2. Make-whole provisions in fixed-rate lending
    1. The concept and basic formula
    2. Enforceability as a matter of state law
  3. No-call provisions
    1. Enforceability of no-calls
  4. Critical issues in bankruptcy involving make-wholes (and no-calls) under the documents
    1. Is it triggered?
    2. How has the drafting changed in response to recent decisions
  5. Critical issues of bankruptcy law
    1. Is the claim disallowed as "unmatured interest"?
    2. May the class be "unimpaired" and the claim disallowed?


The panel will review these and other key issues:

  • What factors do bankruptcy courts consider in analyzing the enforceability of make-whole and no-call provisions in loan agreements?
  • Is the impairment aspect of the ruling consistent with the statute?  Could it be subject to further challenge in other circuits?
  • What are best practices for counsel to lenders and bondholders to protect entitlement to make-whole premiums?
  • What lessons can you take from Ultra Petroleum and other bankruptcy rulings?


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

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

Millar, James
James H. Millar

Faegre Drinker Biddle & Reath

Mr. Millar has more than 20 years of experience in bankruptcy law and corporate restructuring. He represents...  |  Read More

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