Recovery of Make-Whole Premiums

A lender’s right to recover a make-whole premium as part of its allowed claim in a bankruptcy case has been the subject of considerable judicial debate over the past number of years, with some courts allowing recovery and others denying it. Earlier this year, the U.S. Bankruptcy Court for the Southern District of New York added to the debate by denying bondholders the right to payment of a make-whole premium in connection with the debtor’s refinancing of the bond debt. U.S. Bank Trust Nat’l Ass’n v. American Airlines, Inc. (In re AMR Corp.), 485 B.R. 279 (Bankr. S.D.N.Y. Jan. 17, 2013) (AMR Corp.).