Last week, in In re Jevic, the U.S. Supreme Court reaffirmed the most fundamental principle in bankruptcy – the absolute priority rule – while at the same time recognizing that flexibility in the bankruptcy process itself is essential. It was a very important win for secured lenders.
Yesterday, in In re Jevic, a case of enormous importance to the loan market, the U.S. Supreme Court ruled 6-2 that non-consensual “structured dismissals” that distribute estate assets in violation of the “absolute priority rule” are not permitted under the bankruptcy code. The decision underscores the importance of the absolute priority rule as a bedrock principle of U.S. bankruptcy, a principle that is at the heart of secured lending.
In the past year the LSTA weighed in as amicus curiae (friend of the court) in four cases of enormous importance to the loan market. Happily, the results in the two cases decided so far have been decidedly good. The two other cases have been fully briefed and argued and await decision in the next few months. The cases are recapped below.
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Membership in the LSTA offers numerous benefits and opportunities. Chief among them is the opportunity to participate in the decision making process that ultimately establishes loan market standards, develops market practices, and influences the market’s direction.