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A New Weapon in Mega-Bankruptcy Cases: The Trust Indenture Act

Courts and commentators have long agreed that the Trust Indenture Act (TIA) provides protection against majority amendment to certain core terms. Given recent aggressive maneuvers in mega-cases, the TIA has become a weapon of choice for bondholders to fight back. More pressing questions, however, concern the breadth of this protection in nonconsensual debt restructurings. Should the TIA protect the ability, and not merely the formal right, to receive payment in some circumstances? Is it limited to conduct that disenfranchises the minority, or does it have broader uses as a weapon against unilateral conduct by the issuer that hurts bondholders’ recovery?

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