Restructuring Litigation Update: June 2019

Ropes & Gray's top-ranked restructuring litigation team secured victories in three major bankruptcy disputes during recent weeks.

ENERGY FUTURE INTERMEDIATE HOLDINGS

On April 29, 2019, the United States Supreme Court ended NextEra Energy Inc.’s pursuit of the $275 million break-up fee for its failed acquisition of Oncor. The Supreme Court denied NextEra’s petition for review of a Third Circuit order affirming the reconsideration of the break-up fee. The breakup fee had originally been approved by the bankruptcy court in connection with NextEra’s proposed acquisition of Oncor. As counsel to Elliott Management, Ropes & Gray successfully obtained the reconsideration and nullification of the break-up fee in the bankruptcy court and prevailed on appeal up to the Third Circuit. The nullification of the break-up fee resulted in a substantial increase in distributions to creditors of Energy Future Intermediate Holdings.

TRIBUNE FRAUDULENT CONVEYANCE LITIGATION

Ropes & Gray continues to rack up wins in the decade-long Tribune LBO fraudulent conveyance litigation, which seeks to recover approximately $8 billion in shareholder payments. On April 23, 2019, the United States District Court for the Southern District of New York denied the Tribune litigation trustee’s motion to revive constructive fraudulent transfer claims following the Supreme Court’s Merit Management decision. The District Court followed a roadmap provided by Ropes & Gray, which serves as liaison counsel for the shareholder defendants. The court concluded that a Bankruptcy Code safe harbor for payments made by or to certain financial institutions in securities transactions applied to Tribune as a customer of the financial institution that processed the shareholder payments in the LBO.

MOMENTIVE PERFORMANCE MATERIALS, INC.

On April 19, 2019, the United States Bankruptcy Court for the Southern District of New York ordered a retroactive increase in the cramdown interest rate on Momentive’s 1.5 lien replacement notes to 7.9%. These notes were initially issued at a below-market rate of 4.69% under Momentive’s plan of reorganization in September 2014. Ropes & Gray, as counsel to the indenture trustee for the 1.5 lien notes, objected to confirmation and subsequently appealed the confirmation order to the Second Circuit. Following our arguments, the Second Circuit reversed the bankruptcy court’s original cramdown order, and ordered a new trial. Following the remand trial, in which Ropes & Gray again represented the 1.5 lien indenture trustee, the company paid the deficiency without further appeals.