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Trust Indenture Act and Involuntary Restructurings: Impact of Marblegate and Caesars Bankruptcy Litigation

Navigating Obligor and Bondholder Rights, Implications for the 144A-for-Life Market

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

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Conducted on Tuesday, April 25, 2017

Recorded event now available

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This CLE course will discuss the emergence and subsequent limitation of the Trust Indenture Act (TIA) as a tool for objecting bondholders to challenge restructuring outside of bankruptcy. The program will examine the Marblegate and Caesars Entertainment cases, the Second Circuit’s very recent reversal of the District Court’s decision in Marblegate, and how these decisions will ultimately impact bondholders and indenture trustees in out-of-court restructurings.


In two New York Federal District Court cases, Marblegate Asset Mgmt. v. Education Mgmt. and MeehanCombs Global Credit Opportunities Funds v. Caesars Entertainment, unsecured bondholders successfully challenged out-of-court restructuring plans which effectively forced the bondholders to either convert their debt into equity, or receive nothing. The bondholders alleged that the plans impaired their practical right to receive payments without their consent, in violation of Section 316(b) of the TIA.

The District Courts in Marblegate and Caesars interpreted Section 316(b) of the TIA broadly, giving minority bondholders a powerful tool to prevent out-of-court restructurings and hamper the ability of obligors and senior creditors to negotiate debt restructuring outside of a bankruptcy proceeding.

On January 17, 2017, however, the Second Circuit (in a split decision) reversed the District Court's judgment in Marblegate. The majority interpreted Section 316(b) of the TIA narrowly, holding that the statute did not prohibit the transaction in that case, because it (a) did not amend "core" payment terms of the indenture (i.e., the amount of principal and interest owed and the date of maturity), and (b) did not prevent dissenting bondholders from initiating suit to collect payments. However, the dissenting judge concluded that Section 316(b) of the TIA would preclude out-of-court restructurings that are “collusively engineered” to ensure that minority bondholders receive no payment.

These rulings also have implications for the 144A-for-life market, as those indentures typically have provisions similar to that mandated by Section 316(b). Courts may interpret 144A indenture provisions in a similar way, even if the statutory scheme underlying these indenture provisions are different than that of the TIA.

Listen as our authoritative panel of bankruptcy attorneys analyzes the use of TIA by objecting bondholders to challenge the obligor’s attempt to restructure debt outside of bankruptcy. The panel will discuss the initial Marblegate and Caesars Entertainment rulings, Marblegate’s partial reversal, the impact of TIA on creditors and debtors, and how the TIA and court rulings may impact out-of-court restructurings going forward.



  1. Review of Section 316(a) of the Trust Indenture Act
  2. Review of the Marblegate and Caesars Entertainment decisions in the District Courts
  3. Analysis of the Second Court panel’s majority opinion and dissent in Marblegate
  4. Impact of the Second Circuit’s Marblegate decision on out-of-court restructuring of public debt
  5. Implications for the 144A-for-life market


The panel will review these and other key issues:

  • Why hasn’t TIA been invoked by minority creditors with more frequency?
  • What is the effect of the Second Circuit’s recent reversal of the District Court’s Marblegate decision?
  • What are the implications for out-of-court restructurings going forward? Can TIA still be a tool for bondholders?


Harald Halbhuber
Harald Halbhuber

Research Fellow

Mr. Halbhuber has more than 20 years of experience in transactional practice at major global law firms, focused...  |  Read More

Riela, Michael
Michael J. Riela

Tannenbaum Helpern Syracuse & Hirschtritt

With more than 15 years of experience, Mr. Riela advises companies on complex restructuring, distressed M&A, loan...  |  Read More

Fredric Sosnick
Fredric Sosnick

Shearman & Sterling

Mr. Sosnick is the Practice Group Leader of the firm’s Financial Restructuring & Insolvency Group. He has...  |  Read More

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