breached the intercreditor agreement but
was not the reason for finding a breach.
the junior’s argument that Federal
(FCC) licenses were not part of the
collateral and, instead, interpreted the
agreement as prohibiting any challenge
to lien perfection. In effect, the court
interpreted the intercreditor agreement
to bar the junior from claiming that
no liens could be taken on the FCC
licenses, even if that was correct.
The criticized language is more fairly
viewed as a rhetorical turning of
the tide against Hart Ski’s concern
with the assumed “inequity” of prebankruptcy waivers—far from being
inequitable, enforcement of waivers in
accordance with their terms preserves
the parties’ financial bargain and
discourages abuse of the bankruptcy
process to improve one’s rights.
After all, the juniors undoubtedly
believed they were being adequately
compensated for their waivers when
they agreed to them by investing.
Ion Media also highlights five other
important matters. First, it makes clear
the importance of carefully drafting
intercreditor agreements to ensure
that both waivers and exceptions to
them are clear and unambiguous.
Ion Media also added bite to its rhetorical
bark in two ways: the debtor and
senior defeated the junior’s standing
without having to sue to enforce
While the court also found that the junior
failed to comply with the procedures
required by both the governing
indenture and cash collateral order for
standing to pursue the objection that the
senior’s lien was not perfected, that was
not dispositive. Had the junior satisfied
these standing requirements, it would
have been asserting a claim on behalf
of unsecured noteholders, which would
have fallen into one of the two possible
exceptions to enforcement of the
intercreditor agreement identified by the
Second, it highlights the importance to
seniors of bolstering the enforceability
of waivers through DIP financing or
cash collateral orders. This may be
particularly important because plan
proponents have no obligation to
enforce subordination agreements; had
a plan been proposed not recognizing
the FCC licenses as collateral, the
seniors might have had no right to
object to confirmation as violating the
intercreditor agreement. See TCI 2, supra.
Third, it highlights the risk that a court,
in reaching a result, may strictly enforce
compliance with certain technical rules,
such as those concerning standing,
while overlooking noncompliance with
others, such as Bankruptcy Rule 7001.
There is little reason to doubt that
courts will enforce well-drafted
waivers in an intercreditor
agreement, with the possible
exception of naked assignments
of voting rights. And they may
be enforced with teeth, such as
damages for breach of contract.
Fourth, it indicates that juniors
who disregard rights waivers under
intercreditor agreements may subject
themselves to breach of contract
claims. The measure of damage
suggested by the Ion Media court was
the increased administrative expense
caused by the juniors, but there might
be other injury from obstructive action,
such as the loss of collateral value.
However, a debtor could only sue to
recover damages if it had standing to
enforce the intercreditor agreement,
and the senior could sue only to the
extent that its recovery was reduced.
the intercreditor agreement, and the
junior who disregarded its waivers
was exposed to a damage claim.
The decision holds waivers of
bankruptcy rights enforceable under
Section 510(a). The only potential
exceptions it identifies relate to waivers
of the right to vote on a plan, which was
inapplicable, and the right to appear
as an unsecured creditor, which it
later disregarded. The court, without
requiring an adversary proceeding
under Bankruptcy Rule 7001, opined
on the validity and extent of the
challenged lien and the extent of the
junior’s subordination, enforcing the
intercreditor agreement by denying the
junior’s standing to pursue its objections.
In doing so, the court ruled that
the intercreditor agreement barred
court. However, its arguments still would
have been barred by provisions of the
intercreditor agreement subordinating
unsecured claims of juniors to those of
seniors with respect to the FCC licenses.
Furthermore, the court held that the
intercreditor agreement barred the junior
from objecting to plan confirmation
based on its FCC license arguments. It
interpreted the exception for exercising
rights as an unsecured creditor to not
apply to any exercise of rights that
were barred by an express provision
of the intercreditor agreement, which
expressly barred plan objections (just as
it barred challenges to lien perfection).
Therefore, the junior’s lien perfection
objection to confirmation was not a
preserved right of an unsecured creditor.
Fifth, despite all this, juniors have not yet
been silenced—the junior’s confirmation
objections were considered by the
court and overruled on their merits.
Preventing obstructionism was also a
rationale for enforcing waivers in In
re Erickson Retirement Communities,
LLC, 425 B.R. 309 (Bankr. N.D. Tex.
2010). But as in Ion Media, the
obstructionist characterization played
no role in the court’s interpretation
of the intercreditor agreement.
The court in that case found that juniors
had waived standing to move for an
examiner to investigate the plan’s
allocation of value among different
debtors. The intercreditor agreement
(i) prohibited juniors from taking any
action to enforce their subordinated
claims without the consent of the
collateral agent for the seniors and