juniors and (ii) waived any statutory
rights in conflict with the agreement.
Applying governing state law under
which contracts are interpreted in the
manner that a reasonable person in the
same position would have understood,
the court held that the examiner motion
was the taking of action to enforce the
subordinated obligations before the
senior’s lien was satisfied. The court
also held there was no requirement
that the intercreditor agreement
specifically identify every waived right.
Nevertheless, as in Ion Media, the juniors
were not silenced. The court addressed
the juniors’ arguments on their merits,
concluding it was unnecessary for—and
it would not authorize—an examiner
to conduct the requested investigation.
The court also followed Ion Media in
enforcing the intercreditor agreement
without the need for an adversary
proceeding under Bankruptcy Rule 7001.
Kent C. Kolbig (top) is an associate, and Alan Kolod
(bottom) is a partner in the Business Reorganization,
Bankruptcy and Creditors’ Rights Group at Moses &
Singer LLP in New York City. Kolbig holds a master’s of
law degree from St. John’s University School of Law, a
law degree from Hofstra University School of Law, and
a bachelor’s degree from the University of Connecticut
and is currently pursuing an MBA at the University of
Connecticut, School of Business. Kolod is chairman
of the firm’s Management Committee and holds a law
degree from The Law School, University of Chicago,
and a bachelor’s degree from Bowdoin College. Kolbig
can be reached at email@example.com, and
Kolod can be reached at firstname.lastname@example.org.
In re Boston Generating, LLC, 440 B.R.
302 (Bankr. S.D.N. Y. 2010), interpreted
an agreement to permit juniors to object
to a Section 363 sale supported by the
seniors. But the decision is not hostile to
waivers and does not require evidence
of obstructionism. The court simply
interpreted the agreement and found it
did not prohibit an objection to sale of
collateral. It also held the senior’s consent
to sale was not an exercise of remedies
(based on a stipulation of the parties) that
the juniors had agreed not to challenge.
But, in addition to careful and clear
drafting, counsel must consider the
effect of Bankruptcy Rule 7001, the
with the possible exception of naked
assignments of voting rights. And
they may be enforced with teeth, such
as damages for breach of contract.
no-action provisions in an indenture,
provisions in a DIP financing order
affecting standing, and the ability
of a party to file a cram-down plan
against seniors without regard to
senior rights to full payment under
a subordination agreement. J
Since the agreement preserved the
juniors’ rights as unsecured creditors,
the objection that the sale violated
Section 363 was preserved. The court
made clear that it would have barred
the objection had either the agreement
prohibited objections to collateral
sales consented to by seniors or had
the seniors not stipulated that the sale
was not the exercise of a remedy.
We unlock existing equity and
convert it into working capital.
While the court was influenced by the
fact that juniors were “on the cusp” of a
recovery and therefore were not being
merely “obstructionist,” these facts
could not have changed the meaning
of the intercreditor agreement, and
the court expressly stated that it was
simply interpreting the agreement. In
the end, however, the court approved
the sale motion on the merits.
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Issues to Consider
There is little reason to doubt that
courts will enforce well-drafted
waivers in an intercreditor agreement,
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