Majority Rules: Impact of Bankruptcy 'Credit Bid' Rulings

Law360, New York (November 9, 2009, 5:54 PM EST) -- Restructuring the obligations of a distressed borrower is a process that requires compromise and consensus building. The larger the constituency needed to reach a deal, the greater the risk of holdouts erecting barriers to a consensual workout arrangement.

Courts have sought to mitigate this problem by inferring an “inten[t] to act collectively in the event of the borrower’s default”[1] when interpreting loan documents.

The most notable recent example of this approach was the Second Circuit’s holding in In re Chrysler LLC,[2] where the court affirmed the...
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