Can Second Lien Lenders Be Heard In Connection With A 363 Sale? The Answer In Boston Generating Is A Resounding Yes.


Years ago, second lien lenders adhered to the truism about children – they were seen but not heard. As our children have grown more vocal in recent years, so too have second lien lenders. A spate of recent bankruptcy cases demonstrate that second lien lenders have been both seen and heard at many critical junctures in the chapter 11 timeline -- at the sale of the debtor’s assets under section 363 of the Bankruptcy Code, in seeking the appointment of an examiner, when voting on a chapter 11 plan, and in connection with the confirmation hearing.

The judiciary’s response to the louder voice of second lien lenders has been varied and somewhat unpredictable. Recent decisions in In re Boston Generating, LLC, No. 10-14419 (SCC) (Bankr. S.D.N.Y.), however, are of singular mindset -- second lien lenders can be seen and heard in the context of a 363 sale so long as the intercreditor agreement does not specifically provide otherwise. This ruling was made even though, in the words of the court, it "violated the spirit of the subordination scheme" which the first lien lenders and second lien lenders had agreed to pre-petition.

In the memorandum set forth below, attorneys Ancela R. Nastasi and Keith N. Sambur explore the Boston Generating decision, and provide suggestions for secured lenders seeking to ensure that the "spirit" of their intercreditor agreement is enforced by courts.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ancela Nastasi | Attorney Advertising

Written by:


Ancela Nastasi on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.