This is the last entry in our four-part series analyzing Judge Drain’s widely read bench ruling issued on August 26, 2014 in connection with the confirmation hearing of Momentive Performance Materials and its affiliated debtors. In Parts I and II, we discussed Judge Drain’s conclusions regarding the appropriate calculation of cramdown interest rates for secured creditors. In Part III, we turned to his analysis of certain subordination provisions found in the indentures governing the Debtors’ senior subordinated notes. Today, in Part IV, we discuss Judge Drain’s rulings regarding the parties’ make-whole and third party release disputes.
What You Need to Know: Make-Wholes
Make-wholes have been a “trending” topic of late in the restructuring community. This is partly because it is difficult to find a consistent approach to the issue within the reported decisions. Therefore, even for those of us who have been closely following recent make-whole developments, a brief refresher on make-wholes is always helpful.

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Jessica Kourkounis/Getty Images

Atlantic City, N.J.’s Revel Casino Hotel heads to court Monday to protect a newly emerged bidder in the event someone else walks away with Revel’s assets.
A week after shutting down operations, Revel said Wednesday that it found a buyer, Polo North Country Club Inc., which has offered $90 million in cash for substantially all of Revel’s assets. It’s still unclear whether Polo and its principal, Florida real-estate developer Glenn Straub, plan to operate Revel as a casino.
As part of the bid, Revel is asking the U.S. Bankruptcy Court in Camden, N.J., to approve a $3 million breakup fee for Polo if the transaction doesn’t go through. The company is also asking to schedule an auction for Sept. 24, with competing offers due the day prior.

WSJ.com: Bankruptcy Beat
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Apple's desire to maintain tight control of the payment experience is likely to wind up pushing banks away from iPhones and toward Android and host card emulation technology.

BankThink
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The Circuit Court of Appeals of the 3rd Circuit recently issued its opinion in I

Miami Bankruptcy Law Blog
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The Circuit Court of Appeals of the 3rd Circuit recently issued its opinion in I

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Lehman Brothers Holdings Inc. on Thursday urged a judge to give it a quick victory over Citigroup Inc. in a fight over whether Citi can keep collecting millions in interest on $2 billion Lehman gave it shortly before its collapse. The Wall Street Journal has the Daily Bankruptcy Review article here.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
The operator of the Indiana Toll Roll is considering bankruptcy as is tries to cut its $6 billion debt load, WSJ reports.
MoneyBeat has more on RadioShack Corp.’s continuing cash troubles.

WSJ.com: Bankruptcy Beat
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Receiving Wide Coverage ...

Apple Pay Dissected: Apple Pay "respect[s] our role in the ecosystem" of payments, said James Anderson, senior vice president of product development at MasterCard. And therein lies one explanation of why banks were apparently so eager to partner with Apple on its new payments network, despite the fact they're expected to take a hit to some revenue streams (Apple must have a lot of clout, if this statement from the Times is...

BankThink
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California taxpayers who lost their home to foreclosure or a short sale in 2013 got a last minute tax break when the legislature extended favorable tax treatment for forgiven mortgage debt.
The state law covers only sales or foreclosures occurring prior to January 1, 2014.  It mirrors but is less expansive than the federal law on  qualified mortgage indebtedness.
If the new break applies to you and you’ve filed your return, you can amend the return to claim its benefits.
The FTB supplies more details on AB 1393.
Bad news if you lost your home in 2014:  at present, neither state nor federal tax law for 2014 will exclude from income debt that was cancelled when you sold or lost your home to foreclosure.

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In re The Free Lance-Star Publ’g Co. of Fredericksburg, VA, 512 B.R. 798 (Bankr. E.D. Va. 2014) – After the debtors obtained court approval of bidding procedures to auction substantially all of their assets, a secured creditor sought a court … Continue reading →

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High-yield market guru Martin Fridson’s latest statistical deep dive this week reveals a strange paradox: secured bonds are much more likely than unsecured bonds to end up trading at distressed levels. Fridson, chief investment officer at Lehmann Livian Fridson Advisors, finds that secured bonds account for 40.2% of distressed bonds (bonds trading with risk premiums of at least 10 percentage points over comparable Treasury bonds) outstanding even though they make up just 18.6% of the overall high-yield bond universe. He says 8.82% of outstanding secured issues are currently distressed, versus just 3.04% of senior unsecured bonds, making secured bonds 2.9 times as likely to end up distressed.
Fridson notes that secured bonds still enjoy better recoveries (58.8 cents on the dollar, on average) than senior unsecured bonds (38.9 cents) in the event of a default, but that bonds can suffer big price losses even without a default, as happened in 2007. Here’s Fridson, writing for S&P Capital IQ:
Somewhere there may be investors who do not care one bit if a bond takes a 30-point hickey, as long as they know they will be comparatively well off if the issuer eventually goes bankrupt. Over here in the real world, price declines do matter. Therefore, the goal of high-yield management is not merely to avoid defaults but also to avoid bonds that fall to prices indicative of a high probability of default….

WSJ.com: Bankruptcy Beat
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