U.S. Bank Trust N.A. v. AMR Corp. (In re AMR)

In re AMR Corp., No. 13-1204, 2013 WL 4840474 (3d Cir. Sept. 12, 2013).
The panel for the Second Circuit denied U.S. Bank’s appeal from bankruptcy court decisions authorizing Debtors AMR and American Airlines to obtain postpetition financing and to repay certain prepetition notes held by U.S. Bank, and denied U.S. Bank’s request to lift the automatic stay. Addressing, on direct appeal, a “matter of public importance” in the absence of controlling Second Circuit law, the Court affirmed on the grounds that American’s bankruptcy default accelerated the debt owed but excluded the make-whole amount; U.S. Bank was not entitled to rescind this acceleration, and American’s proposed post-maturity debt repayment was not a voluntary redemption. The Court held that ipso facto clauses in a nonexecutory contract are not unenforceable under §§ 365(e)(1), 541(c)(1)(B), or 363(l). The Court further held that American’s § 1110(a)(2) election, and compliance therewith, did not require American to assume the Indentures or cure the bankruptcy default.
Procedural context:
Direct appeal from the Bankruptcy Court for the Southern District of New York authorizing Debtors to obtain postpetition secured financing and to repay existing prepetition debt owed to Appellant U.S. Bank, and denying U.S. Bank’s request for relief from the automatic stay.
U.S. Bank entered into Indenture Agreements with American including bankruptcy default provisions accelerating payments and contemplating make-whole payments. In Debtors’ bankruptcy case, Debtors moved for leave to obtain postpetition financing and pay indentures from proceeds thereof. U.S. Bank objected on ground that make whole payments must be included with such payment. Bankruptcy Court granted Debtors’ Motion and U.S. Bank’s request to certify for for direct appeal to the Second Circuit.
Livingston, Lynch, Lohier, Lane

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!

About us in numbers

3567 in the system

3451 Summarized

7 Being Processed