"After Marblegate: What Rights do Holdout Bondholders Have?" by Gregory Plotko and Steven Paradise

Print PDF
January 31, 2017

Bondholders have long feared “the tyranny of the majority” and historically have found limited comfort in a provision of the Trust Indenture Act (the “TIA”) that provides minority bondholders with a veto over proposed legal modifications to core payment terms.  In the immediate wake of the Second Circuit’s recent decision in Marblegate Asset Management v. Education Management Corporation, (overturning the 2014 District Court decision and narrowing the practical protective scope of the TIA) some commentators have declared that it is now “open season” for companies and their restructuring advisors to design aggressive and coercive exchange offers, at the expense of minority bondholders.

In this client alert RK&O partners Gregory Gennady Plotko and Steven R. Paradise describe the decision and list legal theories that bondholders may invoke when faced with a coercive out-of-court restructuring that intends to eviscerate the core payment terms provided for an indenture.

Please click here to read the client alert.