Second Circuit Reverses SDNY Decision in Marblegate, Holding that Section 316(b) of the Trust Indenture Act Prohibits Only Non-Consensual Amendments to an Indenture’s Core Payment Terms
On January 17, 2017, the Second Circuit Court of Appeals (the “Court”) held that Section 316(b) of the Trust Indenture Act of 1939, as amended (“TIA”), prohibits only non-consensual amendments to an indenture’s core payment terms (the amount of principal and interest owed and the date of maturity). This holding reversed the decision of the District Court for the Southern District of New York (the “SDNY”), which had held that an out-of-court restructuring that involved the elimination of a parent guarantee and a significant asset transfer was impermissible under Section 316(b) of the TIA because such actions impaired the nonconsenting noteholders’ right to receive payment.