Bankruptcy Law Is More Ambiguous Than We Thought

On Friday, the U.S. Court of Appeals for the Second Circuit issued a decision in In re MPM Silicones, LLC, a bankruptcy case involving the reorganization of Momentive Performance Materials Inc. The court decided a couple of questions that might be of interest to distressed investors and bankruptcy lawyers: It held that bondholders should not get early-redemption make-whole payments upon bankruptcy, and that if a debtor is going to satisfy secured bondholders’ claims in full in a reorganization by giving them new bonds, those bonds should probably have a market-based rate of interest.