A decision seen by practitioners as restricting nonconsensual out-of-court debt reorganizations has been reversed by the U.S. Court of Appeals for the Second Circuit.
A divided panel held Tuesday that Section 316(b) of the Trust Indenture Act of 1939 “prohibits only non-consensual amendments to an indenture’s core payment terms,” but other restructuring can be done without violating the act’s prohibition on impairing the rights of noteholders.
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