Ultra Petroleum Corporation et al. v. Ad Hoc Committee of OpCo Unsecured Creditors,
No. 21-20008 (5th Cir. 2022)
- Make-whole provisions—common provisions in credit agreements providing for lump sum payments to compensate a lender for unpaid interest if a borrower prepays—have been the subject of litigation concerning whether a claim for a make-whole payment is disallowed under the Bankruptcy Code.
- In the recent Fifth Circuit decision, Ultra Petroleum Corp. v. Ad Hoc Committee of OpCo Unsecured Creditors, the Court addressed the consequential question against enforceability, holding that make-whole payments are equivalent to impermissible unmatured interest.
- The Ultra Petroleum decision was the first circuit court case to directly answer the question of whether make-whole payments are generally allowable, and it broke with lower court decisions allowing claims for make-whole payments.