The court awarded OpCo Noteholders in excess of $320 million in Make-Whole Amount and post-petition interest, confirming that make-whole is an enforceable liquidated damage claim.
On September 21, Judge Marvin Isgur of the US Bankruptcy Court for the Southern District of Texas delivered his much anticipated decision in the Ultra make-whole challenge. Morgan Lewis represented a group of OpCo Noteholders in this matter and we are pleased to report that the Judge adopted the Noteholders’ reasoning, rejected the Debtors’ arguments, and awarded the Noteholders the full Make-Whole Amount and post-petition interest.
By way of brief background, Ultra Petroleum Corp. (HoldCo), Ultra Resources, Inc. (OpCo), and other Ultra entities (collectively, the Debtors) filed for bankruptcy protection on April 29, 2016. The Debtors classified the OpCo Notes as unimpaired under the plan of reorganization, yet objected to the Make-Whole Amount triggered as a result of the filing. The Debtors acknowledged that OpCo was solvent, and proposed to pay post-petition interest at the federal judgment rate on all OpCo claims. The plan became effective on April 12, 2017.
The Debtors asserted that despite classifying the OpCo Notes as unimpaired, the Make-Whole Amount was not due and owing, arguing that
In defense of the Make-Whole Amount and the payment of post-petition interest by a solvent debtor, the OpCo Noteholders argued at oral argument and in their reply brief and post-hearing brief that
We are pleased to report that the court adopted all of our arguments on the above, and awarded the OpCo Noteholders the full Make-Whole Amount, post-petition interest at the contract default rate, and all other related fees and expenses—a total amount in excess of $320 million. This decision confirms that a make-whole provision is an enforceable liquidated damage provision under New York law and an appropriate component of noteholder claims in bankruptcy.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Boston
Andrew J. Gallo
Amelia C. Joiner
Arcangelo Cella
Daniel J. Ball