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Delaware Bankruptcy Court Weighs in on Intercreditor Agreements

31 American Bankruptcy Institute Journal 14 (No. 6 July 2012)
July 2012

Jeff Pomerantz and Shirley Cho joined lawyers from two other law firms to cowrite this article on the recent ruling in In re CyberDefender Corporation, in which the bankruptcy court addressed the rights of nonconsenting junior lienholders in bankruptcy sales. In Cyberdefender, a chapter 11 case currently pending in the Delaware bankruptcy court, the debtor proposed to sell its business to its senior secured lender in exchange for a credit bid, assumption of certain liabilities, and release of any senior debt claims above the credit bid. Junior lienholders who were out of the money objected to the sale, arguing that per the Ninth Circuit decision in Clear Channel, the debtor could not sell free and clear of the juniors’ liens unless the aggregate value of cash proceeds from the sale exceeded the face value of the senior debt and the junior debt.  In a noteworthy decision, the Delaware Bankruptcy Court overruled the objection and, in doing so, sided with the line of cases that hold contrary to Clear Channel.

Retrieve article in pdf below; reprinted with permission of the American Bankruptcy Institute.

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