Almost one year after oral arguments were heard, the United States Court of Appeals for the Second Circuit issued an opinion in the In re MPM Silicones, L.L.C. (“Momentive”) bankruptcy case. While four distinct issues were before the court, one of them, whether a debtor in a bankruptcy can “cram down” senior secured creditors with below-market rate replacement notes, was by far the most critical to loan market participants. The key takeaway:
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.
LSTA filed this amicus brief: should a market rate of interest be applied in Chapter 11 cases where there exists an efficient market or should courts rely on a “formula” rate such as a risk-free base rate plus a credit spread?
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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.