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November 26, 2018

To Subordinate or Not Subordinate? How Tribune Media Co. Implicates Subordination Agreements in Cramdown Plans

By Shane G. Ramsey, John T. Baxter, Woods Drinkwater

ABI Journal

On July 30, 2018, the District of Delaware issued a decision in certain consolidated appeals in the Tribune Media Co. bankruptcy case.2 The primary question in these appeals was whether the debtors’ confirmed plan unfairly discriminated against certain impaired senior noteholder creditors, whose senior status was attributable to a pre-petition subordination agreement, in violation of § 1129 (b) (1) of the Bankruptcy Code.3 This decision instructs that a bankruptcy court may disregard any pre-petition subordination agreement and its provisions upon confirmation of a chapter 11 plan over an impaired class of creditors’ objection.

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