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Secured Claims: Determination of Secured Status, Make-Whole Provisions, Yield Maintenance and Credit Bidding

The determination of the amount of a secured creditor’s claim and related issues often have a significant impact on both junior creditor recoveries and the likelihood of a successful reorganization. Such cases as Gencarelli, School Specialty, Momentive Performance Materials and MPM Silicones regarding “make whole” or “yield maintenance” provisions, as well as cases like SW Boston relating to the calculation of oversecured or undersecured status, have led to further uncertainty in this area. These provisions are under increasing attack as debtors attempt to refinance high-yield debt in today’s lower-interest-rate environment. Finally, the recent decisions in Fisker Automotive Holdings, Free Lance-Star Publishing and RML Development have raised uncertainty in the area of credit-bidding.

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