On January 21, 2015, the United States Court of Appeals for the Second Circuit entered an opinion holding that an authorized UCC-3 termination statement is effective, for purposes of Delaware’s Uniform Commercial Code (the “UCC”), to terminate the perfection of the underlying security interest even though the secured lender never intended to extinguish the security interest and mistakenly authorized the filing.

Background -

In 2006, General Motors Corporation (“GM”) entered into a $1.5 billion secured term loan with a syndicate of financial institutions. To perfect certain of the security interests granted to the lenders, the administrative agent (the “Agent”) filed a UCC-1 financing statement with the Delaware Secretary of State (the “Original Filing”). In 2008, a termination statement for the Original Filing was mistakenly included in a set of UCC-3 termination statements filed in connection with the payoff of an unrelated synthetic lease financing.