Delaware Trust Co. v. Energy Future Intermediate Holding Co. (In re Energy Future Holdings Corp.)
527 B.R. 178
Bankr. D. Del.2015Background
- EFIH issued 10.000% First Lien Notes due 2020 under an Indenture (Aug. 17, 2010) that includes an Optional Redemption (§3.07 with an "Applicable Premium") and automatic acceleration on bankruptcy (§6.01(a)(6), §6.02).
- EFIH and related debtors filed chapter 11 on April 29, 2014; DIP financing was approved and used to repay outstanding Note principal and accrued interest on June 19, 2014. Some noteholders settled; others (via the Trustee) pursued claims for the Applicable Premium.
- Trustee sued seeking (inter alia) a declaratory judgment that EFIH’s post-petition repayment was an Optional Redemption requiring the Applicable Premium, that EFIH intentionally filed to avoid the premium, and that the Trustee’s June 4, 2014 rescission (deceleration) was effective.
- The Indenture grants noteholders (majority) the right to waive defaults and rescind acceleration (§6.02 ¶3) unless rescission would “conflict with any judgment of a court of competent jurisdiction.” The automatic stay under §362 arose on filing.
- The court treated Phase One as assuming EFIH solvent (except for intent-to-default issue) and addressed legal questions on summary judgment after discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether repayment after bankruptcy acceleration required payment of the Applicable Premium | Repayment was a redemption triggering §3.07 and the Applicable Premium | Acceleration under §6.02 on bankruptcy made repayment post‑acceleration payment of matured debt (not an optional redemption); §3.07 does not apply | Held for defendants: Indenture does not unambiguously require Applicable Premium after bankruptcy acceleration (summary judgment for EFIH on counts asserting premium), subject to stay issue below |
| Whether EFIH intentionally filed bankruptcy to avoid the Applicable Premium | EFIH filed to avoid paying the make‑whole; various restructuring proposals show intent | EFIH filed because of severe liquidity constraints; use of bankruptcy tools does not prove intentional default to evade payment | Held for defendants: insufficient evidence of intentional default (summary judgment for EFIH) |
| Whether the Trustee’s rescission/deceleration right was barred by the Indenture phrase "conflict with any judgment of a court of competent jurisdiction" because of the automatic stay | The automatic stay prevents rescission only if it is equivalent to a judicial judgment | The stay functions as a court order/judgment and thus rescission would conflict with it | Held: The automatic stay is statutory, not a "judgment"; rescission right is not barred by that phrase, but the Trustee’s June 4 notice was blocked by the automatic stay (stay violation) |
| Whether the stay should be lifted nunc pro tunc to validate the Trustee’s June 4 rescission (and thereby make the refinancing an Optional Redemption) | Because EFIH is presumed solvent for Phase One, cause exists to lift the stay nunc pro tunc so the Applicable Premium would be owed | Lifting the stay could prejudice the estate and is fact‑sensitive; solvency alone does not compel relief | Held: Genuine dispute of material fact exists whether Trustee can show cause to lift the stay nunc pro tunc; summary judgment on lift‑stay issue denied (no party entitled to summary relief on that question) |
Key Cases Cited
- In re AMR Corp., 730 F.3d 88 (2d Cir. 2013) (analyzing whether make‑whole is due post‑bankruptcy acceleration)
- United Merchs. & Mfrs., Inc. v. Equitable Life Assurance Soc'y of the U.S., 674 F.2d 134 (2d Cir. 1982) (upholding prepayment premium clauses when contractually specified)
- In re Solutia Inc., 379 B.R. 473 (Bankr. S.D.N.Y. 2007) (post‑acceleration payment is not a prepayment; make‑whole not owed absent express contract language)
- In re Premier Entm't Biloxi LLC, 445 B.R. 582 (Bankr. S.D. Miss. 2010) (similar contract interpretation regarding acceleration and prepayment premium)
- In re MPM Silicones, LLC, 518 B.R. 740 (Bankr. S.D.N.Y. 2014) (automatic stay bars rescission notice; analysis of redemption vs. acceleration)
- In re South Side House, LLC, 451 B.R. 248 (Bankr. E.D.N.Y. 2011) (prepayment premium not owed after default unless agreement expressly requires it)
- LHD Realty Corp. v. Travelers Ins. Co., 726 F.2d 327 (7th Cir. 1984) (acceleration advances maturity so subsequent payment is not prepayment)