During the recent wave of Chapter 11 bankruptcy filings, the bankruptcy debtor’s ability to reinstate debt without the lenders’ consent has been a central dispute in several reorganization plans. Reinstatement of “covenant-lite” and low-interest rate financings of predownturn vintage continues to be an attractive option for many borrowers and, correspondingly, a potential risk for lenders. Reinstatement fights have occurred in several recent Chapter 11 reorganization proceedings in response to attempts to involuntarily reinstate debt as an unimpaired class under a reorganization plan.
Most notably, on Nov. 30, 2009, Charter Communications Inc. successfully reinstated approximately $11.8 billion in secured debt and emerged from its bankruptcy proceedings after prevailing in a hotly contested reinstatement fight against its secured lenders. In re Charter Communications Inc., No. 09-11435 (Bankr. S.D.N.Y.).
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