F. Thomas Rafferty

F. Thomas Rafferty is a shareholder in Baker Donelson’s Baltimore office. Contact him at trafferty@bakerdonelson.com

Multiple draw and revolving loan lenders and counsel can find three important lessons in the 84 page trial ruling after eight years of litigation, three federal judges, and more than five interesting opinions. See Weisfelner, Trustee v. Blavatnik (In re Lyondell Chem. Co.), 567 B.R. 55 (Bankr. S.D.N.Y. 2017). First, the conditions precedent to further funding should be independent, robust, and not a simple absence of a Default (or a circumstance that with notice or passage of time would be a Default). Second, at least for this company and this loan document, a financial decline into insolvency was not a material adverse change, so keep the concepts separate in both the conditions to funding and the Events of Default. Consider defining a material adverse change to include the fall into insolvency. Third, a contractual limitation on damages in a loan agreement should give some comfort in declining a borrower’s request for a $750┬ámillion draw on the eve of bankruptcy. (more…)

The Supreme Court’s newest bankruptcy case, Jevic Holdings Corp. (3/22/17), illustrates three important lessons for secured creditors and lessors. It holds that the dismissal of a Chapter 11 case cannot, without the consent of the affected parties, depart from the statutory priority rules. The Court disapproved this structured dismissal of the Chapter 11 case, even though it implemented multiparty settlements. The Court reserved generally on the legality of structured dismissals and common “first day” orders paying prepetition wages, “critical vendors,” and “roll-ups” of pre-petition secured claims into post-petition DIP financing. (more…)