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Second Circuit Affirms Bankruptcy Court Ruling Authorizing American Airlines to Repay $1.3 Billion Debt without Make-Whole
16 September 2013
A recent decision by the Court of Appeals for the Second Circuit affirms a ruling by Judge Sean Lane of the Bankruptcy Court for the Southern District of New York authorizing American Airlines to repay $1.3 billion in debt without payment of a make-whole amount.
The decision reaffirms that if parties to a financing wish to provide for the payment of a make-whole premium upon the repayment of accelerated debt, they must clearly and unambiguously provide for such payment in their agreements.
The Second Circuit further rejected the argument that American’s election under Section 1110(a) of the Bankruptcy Code reversed the acceleration of the debt that occurred upon American’s bankruptcy filing, noting that Section 1110(a)(2) does not modify the parties’ contractual relationship but merely provides a mechanism by which the debtor can take advantage of the automatic stay with respect to leased or financed aircraft and related equipment.
Richard F. Hahn
M. Natasha Labovitz
George E.B. Maguire
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