Schuyler Carroll ,left, and Tia Thevenin ,right, of Manatt, Phelps & Phillips. Courtesy photos
Make-whole provisions require borrowers to pay a premium if a loan is repaid before maturity. Make‑wholes are intended to compensate the lender for the loss of anticipated interest that the lender otherwise would have received if the debt was paid off at maturity. As such, these provisions are also referred to as “call protection,” “yield maintenance,” “redemption” and “prepayment premiums.”
Most make-whole provisions are enforceable outside of bankruptcy, but courts have issued conflicting decisions on their enforceability in Chapter 11 cases.
