the assignment of voting rights in intercreditor agreements: enforceability and its impact on plan...

© Alexander J. Nicas 2012

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The Assignment of Voting Rights in Intercreditor Agreements: Enforceability and its Impact on Plan Confirmation

By: Alexander J. Nicas

St. John’s University School of Law Candidate for Juris Doctor, June 2012

Second lien financing, an agreement to “share” collateral already encumbered by the first

lien lender, came into great favor last decade.1 From 2000-2007, the dollar volume for second

lien loans grew from $200 million to an astonishing $30 billion.2 Before a first lien lender

normally grants access to its collateral, first and second lien lenders will enter into an

intercreditor agreement defining their relative rights.3 Throughout the boom years, second lien

lenders agreed to subordinate, waive, or assign virtually all their secured creditor rights to the

first lien lender.4 This paper focuses on one common provision – an assignment of voting rights

– to determine if it can trump the specific Bankruptcy Code (“Code”) provision defining who can

vote for a plan of reorganization.

While many first lien lenders believed that their intercreditor agreements guaranteed

control over the shared collateral, participants relied heavily on “market practice” when drafting

1 See Lisa Matalon et al., Overview of the U.S. Second-Lien Loan Market, Corporates/U.S. and Canada Special Report, Fitch Ratings (Feb. 6, 2006), for an excellent overview of the development, participants, and risks of the second lien loan market, written towards the apex of loan issuance. 2 See e.g., COMMITTEE ON COMMERCIAL FINANCE, ABA SECTION OF BUSINESS LAW, REPORT OF THE MODEL FIRST LIEN/SECOND LIEN INTERCREDITOR AGREEMENT TASK FORCE, 65 Bus. Law. 809, 810 (2010) (noting that the second quarter of 2007 topped out at over $15 billion in loan issuance) [hereinafter Task Force]; Latham & Watkins LLP, Everything You Always Wanted to Know About Second Lien Financing (May 19, 2004). See also Robert Polenberg, 4Q10 Second-Lien Lending Review, Standard & Poor’s (2011) (stating that, in 2008, 2009, and 2010, there were approximately $3 billion, $1.9 billion, and $4.8 billion, respectively, of new second lien debt issuance). 3 See Task Force, supra note 2. 4 See id.


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agreements.5 For lenders, “market practice” was the only option because bankruptcy courts had

published very little guidance on the enforceability of blanket waivers.6 Parties have only just

begun to litigate their disputes over the enforceability of broad second lien intercreditor

agreements,7 and only a handful of bankruptcy court decisions have addressed the assignment of

voting rights provision. Those decisions discussed in this paper have been inconsistent in their

enforcement, and no circuit court has had the opportunity to decide the issue.

The ensuing analysis will address whether § 1126 of the Bankruptcy Code – defining

who can vote for a plan of reorganization – trumps a pre-petition intercreditor agreement that has

assigned the right to vote from the second lien lender to the first lien lender. Part I of this paper

describes a typical intercreditor agreement. Part II outlines the arguments for and against

enforcing certain provisions of an intercreditor agreement. Part III analyzes two recent cases

holding that the assignment of voting rights are unenforceable, while Part IV highlights two

cases holding the opposite – a pre-petition contractual agreement can alter the parties

bankruptcy-specific rights, therefore a first lien lender can vote on behalf of a second lien lender.

In conclusion, Part V discusses which approach is more persuasive.

5 See id. 6 In 2005, the co-head of global banking at Latham & Watkins (counsel to many early second lien loan market participants) stated “[second lien financing is] still a new product; many of the intercreditor agreements have not been tested through the bankruptcy process.” See Kerrry Kantin, Second Liens Will Ride in ’05, But Growing Pains’ Expected, BANK LOAN REPORT (Feb. 7, 2005). See also Matalon, supra note 1 (stating the [s]ince the large-scale introduction of second-lien loans over the past several years was distinguished by a benign credit cycle with below-average defaults, there has been very limited real world testing of these transactions.”). 7 Compare In re Ion Media Networks, Inc., 419 B.R. 585 (Bankr. S.D. N.Y. 2009) (holding that a subordination agreement barred a second lien lender from objecting to the confirmation of the debtor’s Chapter 11 plan on the basis of whether certain FCC licenses were subject to the first lien lender’s liens) with In re Boston Generating, LLC, 440 B.R. 302 (Bankr. S.D. N.Y. 2010) (finding that, notwithstanding an enforceable intercreditor agreement, the second lien lenders had standing to object to a sale of assets under § 363).


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I. A Typical Intercreditor Agreement

The most common provision of an intercreditor agreement – the subordination clause8 –

grants the first lien lender priority over proceeds of the collateral it shares with the second lien

lender.9 As mentioned above, provisions beyond payment subordination became commonplace

in second lien financing agreements over the last decade. For example, many second lien lenders

agreed to “standstill” after funding, limiting their ability to foreclose or act against shared

collateral, either under state law or in a bankruptcy proceeding.10 Second lien lenders typically

waived a host of other bankruptcy-specific rights in a standard intercreditor agreement, such as

the right to: (i) demand adequate protection, (ii) oppose the use of cash collateral, (iii) object to

debtor-in-possession (“DIP”) financing that is supported by the first lien lender, and (iv) vote in a

Chapter 11 plan of reorganization.11

At the time these intercreditor agreements were signed, “standstill” or “silent second”

provisions were an untested bargaining chip. The sparse case law on subordination agreements

provided no guidance as to how bankruptcy courts might interpret and enforce the provisions,

8 As subordination clause or subordination agreement substantively mean the same thing. For purposes of this article, an intercreditor agreement will refer to the broad agreement that defines all of the rights of first and second lien lenders. 9 See e.g., In re Bank of New England Corp. 364 F.3d 355, 361 (1st Cir. 2004) (stating that a subordination agreement “alters the normal priority of the junior creditor’s claim so that it becomes eligible to receive a distribution only after the claims of the senior creditor have been satisfied”). 10 In this situation, the first lien lender may require that the second lien lender waive their right to move for relief from the automatic stay. 11 See William L. Norton, The impact of second lien financings on DIP financing, 5 NORTON BANKR. L. & PRAC. 3d § 94:37 (2012).


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and lenders paid little attention.12 Second lien financing was attractive to borrowers and the

system was flush with capital for investment.13

II. Interpreting Intercreditor Agreements in Bankruptcy

Nowhere in the Bankruptcy Code (“Code”) will one find the term “intercreditor” or

“intercreditor agreement.” The Code does, however, contain a provision governing

“subordination agreements.” Section 510(a) of the Code provides that “[a] subordination

agreement is enforceable in a case under this title to the same extent that such agreement is

enforceable under applicable nonbankruptcy law.” Thus, if a subordination agreement is valid

under state law, it should also be enforceable in a bankruptcy case. Despite its apparently clear

language, bankruptcy courts have been inconsistent in deciding “whether ‘subordination’ . . . can

mean more than priority in distribution and lien rights in a bankruptcy case and can include the

prebankruptcy waiver of the right[s] conferred under the Bankruptcy Code.”14

First lien lenders, trying to enforce an intercreditor agreement and the bargained-for

provisions included therein, often point to § 510(a) as insulating the intercreditor agreement from

being rendered unenforceable in a bankruptcy case. On the other hand, second lien lenders will

try to limit the scope of enforceability to the subordination clause itself (i.e. only the

12 See supra note 6. 13 See Matalon, supra note 1 (discussing how the growth in loan issuance coincided with tremendous amounts of new capital provided by hedge funds, distressed debt vehicles, and private equity seeking higher investment returns). 14 See David S. Kupetz, Intercreditor Subordination Agreements and Voting Rights in Chapter 11, 2010 ANN. SURV. BANKR. L. 11 (2010). Other commentators have also recognized that “it can be difficult to predict with certainty whether a bankruptcy court will enforce the waiver or assignment of ancillary rights.”14 See Mark N. Berman & David Lee, The Enforceability in Bankruptcy Proceedings of Waiver and Assignment of Rights Clauses Within Intercreditor or Subordination Agreements, 20 J. BANKR. L. & PRAC. 6, Art. 1 (Nov2011).


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subordination of payment), while arguing that pre-petition waivers of ancillary rights are

unenforceable.

III. A Pre-Petition Assignment of Voting Rights is Unenforceable in Bankruptcy.

a. In re SW Boston Hotel Venture, LLC

In November 2011, the bankruptcy court in SW Boston Hotel held that an assignment of

voting rights is not enforceable because such agreement nullifies specific provisions of the

Bankruptcy Code.15 To finance the construction of a W Hotel and residential condominiums, the

debtor obtained a first lien construction loan from Prudential, secured by a first mortgage on the

property. The debtor then obtained a second lien loan from the City of Boston, secured by a

second mortgage on the property.16 At the time second lien financing was originated, Prudential

and the City of Boston executed an intercreditor agreement that subordinated all rights of

payment to Prudential, and expressly assigned – from the City to Prudential – the right to vote in

a future bankruptcy proceeding.17 Pursuant to these provisions, Prudential sought to validate a

ballot cast on behalf of the City in Debtor’s plan of reorganization.18

First, the court followed and adopted the reasoning of In re 203 N. LaSalle Street

P’ship.19 This case stated that an assignment of voting rights was contrary to § 1126(a) because

15 In re SW Boston Hotel Venture, LLC, 460 B.R. 38, 52 (Bankr. D. Mass. 2011). Debtor, SW Boston, was a company formed by a local Boston family to develop the property at 100 Stuart Street, in the Heart of Boston’s Theatre District. See (Proposed) Disclosure Statement with Respect to Joint Plan of Reorganization of SW Boston Hotel Venture LLC, et al., In re SW Boston Hotel Venture, LLC, No. 10-14535-JNF, 2011 WL 6941723 (Bankr. D. Mass. Mar. 31, 2011). 16 SW Boston Hotel, 2011 WL 6941723. PRISA, a division of Prudential Insurance Company of America was the first lien lender, while the City of Boston was the second lien lender. SW Boston Hotel, 460 B.R. at n.2. The lenders held a first and second mortgage on the property, respectively. SW Boston Hotel, 2011 WL 6941723. 17 Id. 18 Id. at 47-48. 19 256 B.R. 325 (Bankr. N.D. Ill. 2000)


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only the holder of a claim may accept or reject a plan.20 As Prudential, the assignee-first lien

lender, wasn’t the holder of the claim, the court found that the assignment of voting rights

provision was invalid because it “purports to alter substantive rights under the Bankruptcy

Code.”21

Next, the court looked to In re Hart Ski Mfg. Co.22 This case broadly stated that the

“Bankruptcy Code guarantees each secured creditor certain rights, regardless of subordination . .

. [and] [t]o hold that, as a result of a subordination agreement, the “subordinator” gives up all the

rights to the “subordinee” would be totally inequitable.”23 Finding this case law persuasive, the

court stated that the “City’s vote accepting the Plan of reorganization was valid and that

Prudential cannot be permitted to reject the Plan on behalf of the City.”24

b. In re Croatan Surf Club, LLC

Croatan Surf Club addressed the same issue as SW Boston Hotel and came to the same

conclusion: a first lien lender does not have authority to vote a second lien lender’s claim,

although the intercreditor agreement between the parties expressly assigned the right to vote.25

20 SW Boston Hotel, 460 B.R. at 52. 21 Id. 22 5 B.R. 734 (Bankr. D. Minn 1980) 23 Id. at 736. In dicta, the court stated that rights “not related to contract priority of distribution pursuant to § 510 cannot be affected by the actions of the parties prior to the commencement of a bankruptcy case when such rights did not even exist.” Id. 24 SW Boston Hotel, 460 B.R. at 52. 25 In re Croatan Surf Club, LLC, No. 11-00194-8-SWH, 2011 WL 5909199, at *1 (Bankr. E.D. N.C. Oct. 25, 2011). Debtor, Croatan Surf Club, purchased a 36-unit condominium building in Kill Devil Hills, North Carolina with a first lien loan provided by Royal Bank America (“RBA”), and a second lien loan provided by Edwards Family Partnership, L.P (“EFP”). The lenders held a first and second deed of trust on the property, respectively. The parties’ subordination agreement expressly subordinated the priority and right to payment of EFP to RBA, and also contained provisions stating that RBA is empowered to file claims and proofs of claims and to take such other action including, without limitation, the voting of subordinate debt. See id.


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Most importantly, the court illustrated why the assignment of voting rights provision was

unenforceable by tracing through three provisions – §§ 1129(b)(1), 1126(a), and Rule 3018(c)).

Section 1129(b)(1) of the Code begins with “[n]otwithstanding section 510(a).”26 To help

interpret this phrase, the court in Croatan Surf Club quoted In re TCI 2 Holdings, LLC:

The only logical reading of the term “notwithstanding” . . . seems to be: “Even though section 510(a) requires the enforceability of subordination agreement in a bankruptcy case to the same extent that the agreement is enforceable under nonbankruptcy law, if a nonconsensual plan meets all of the § 1129(a) and (b) requirements, the court ‘shall confirm the plan.’”27

Because the court was persuaded that “notwithstanding” removed § 510(a) from the purview of

§§ 1129(a) and (b), the court held that it could “confirm a plan which disrupts bargained for

priority, and thus is inconsistent with the terms of a subordination agreement, as long as it is fair

and equitable and does not discriminate unfairly.”28

Next, the court turned to § 1126(a), and the arguments discussed above – citing both 203

N. LaSalle and Hart Ski.29 With these cases as guideposts, the court held that subordination only

provides a different order of payment, and does not override the plain language of § 1126(a).30

Moreover, the court looked to the value of the shared collateral, and a subordinate lender’s

potential for receiving a distribution in the case.31 Judge Wedoff, author of the 203 N. LaSalle

opinion, championed this viewpoint:

26 See generally 11 U.S.C. § 1129(b)(1) (allowing a debtor to “cram down” a plan of reorganization over the objection of an impaired class of creditors). 27 In re TCI 2 Holdings, LLC, 428 B.R. 117, 141 (Bankr. D. N.J. 2010). 28 In re Croatan, 2011 WL 5909199, at *2. The court went on to state that just because a subordination agreement may “contractually arrange the respective priority of debts . . . it was not intended to give the parties carte blanche to override . . . the Bankruptcy Code.” Id. Such a narrow interpretation of § 510(a) is particularly problematic for first lien lenders because it seems to vitiate any bargained-for waivers above and beyond payment subordination. 29 See id. 30 See id. 31 See id. at *3


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[F]ar from producing any results at odds with the intent of Congress, the plain language of § 1126(a) is completely consistent with reasonable bankruptcy policy. Although a creditor’s claim is subordinated, it may very well have a substantial interest in the manner in which its claim is treated . . . . If the assets in a given estate are sufficient, a subordinated claim certainly has the potential for receiving a distribution, and Congress may well have determined to protect that potential by allowing the subordinated claim to be voted. This result assures that the holder of a subordinated claim has a potential role in the negotiation and confirmation of a plan, a role that would be eliminated by enforcing contractual transfers of Chapter 11 voting rights.32

Given that the second lien lender likely had a secured claim, and most certainly had an

unsecured claim, the court in Croatan Surf Club held that the second lien lender’s interests

“should be protected through the right to vote its claim(s) and negotiate its treatment.”33

Finally, the court evaluated the effect of Federal Rule of Bankruptcy Procedure 3018(c),

which states, in part: “[a]n acceptance or rejection shall be in writing . . . [and] signed by the

creditor or equity security holder or an authorized agent.”34 The first lien lender argued that this

rule allowed it to vote the second lien lender’s claim because it was the second lien lender’s

agent pursuant to the intercreditor agreement.35 The court rejected this view, holding that the first

lien lender wouldn’t be acting at the direction of a principal, a necessary predicate to an agency

relationship, but would be acting out of self-interest.36

Thus, SW Boston Hotel, Croatan Surf Club, 203 N. LaSalle, and Hart Ski all stand for the

proposition that a second lien lender may not assign its right to vote in Chapter 11 plan

confirmation, regardless of the terms of the parties pre-petition intercreditor agreement.

32 In re 203 N. LaSalle Street P’ship, 246 B.R. 325, 332 (Bankr. N.D. Ill. 2000). 33 In re Croatan, 2011 WL 5909199, at *3. 34 FED. R. BANKR. P. 3018(C). 35 In re Croatan, 2011 WL 5909199, at *3. 36 Id. Specifically, the court stated that agency involves “the existence of the right to control the method or manner of accomplishing a task,” something absent in this case. Therefore, the first lienholder could not be seen as the second lienholder’s agent for purposes of Rule 3018(c). Id.


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III. A Pre-Petition Assignment of Voting Rights is Enforceable in Bankruptcy.

a. Blue Ridge Investors II, LP v. Wachovia Bank (In re Aerosol Packaging, LLC)

In Aerosol Packaging, the first lien lender sought to vote the claims of the second lien

lender pursuant to the parties’ intercreditor agreement.37 The debtor, who was a party to the

agreement, supported the first lien lender’s attempt to vote on behalf of the second lien lender

because a substituted vote would allow the court to confirm the debtor’s plan of reorganization.38

In contrast to the approach taken in 203 N. LaSalle and its progeny, the court in Aerosol

Packaging found that § 1126(a) “grants the right to vote to a holder of a claim, but does not

expressly or implicitly prevent that right from being delegated or bargained away by such

holder.”39 Furthermore, because the subordination agreement appeared to be enforceable under

state law (as required by § 510(a)), and because Federal Rules of Bankruptcy Procedure 3018

and 901040 “explicitly permit agents and other representatives to take actions, including voting,

on behalf of other parties,” the court was compelled to recognize that the right to vote the second

lien lender’s claim had been lawfully assigned to the first lien lender and should be enforced in

the bankruptcy case.41

b. Avondale Gateway Center Entitlement, LLC v. Nat’l Bank of Arizona

37 362 B.R. 43, 45-47 (Bankr. N.D. Ga. 2006). The tri-party subordination agreement stated that the first lien lender had the “the right to vote the claims” of the second lien lender. Id. 38 Id. at 44-45. Debtor, operating a business engaged in filling aluminum and tin plate aerosol cans with customer products (i.e. air fresheners, paint, personal care products, etc), entered into a first lien loan agreement with Wachovia Bank, secured by substantially all of the debtor’s personal property. The debtor also obtained a loan from Blue Ridge Investors II, L.P., secured by a second priority lien and security interest in substantially all of the collateral secured by the Wachovia’s first lien. See Emergency Motion for Authority to Use Cash Collateral and to Provide Adequate Protection Therefore and Request for Emergency Preliminary Hearing, In re: Aerosol Packaging, LLC, No. 06-67096, 2006 WL 1904391 (Bankr. N.D. Ga. June 22, 2006). 39 Id. at 47. 40 FED. R. BANKR. P. 9010 (Representation and Appearances; Powers of Attorney). 41 In re Aerosal Packaging, 362 B.R. at 47.


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In Avondale Gateway, the issue before the court was different than the prior cases

because the parties’ subordination and intercreditor agreements did not expressly assign the

second lien lender’s right to vote on a plan of reorganization.42 Prior to bankruptcy, the debtor

purchased 100 acres of undeveloped real property, secured by a $30 million first lien loan from

the National Bank of Arizona (“NBA”), and an $18 million second lien loan from MMA Realty

Capital, Inc. (“MMA”).43 On appeal from the Bankruptcy Court, the U.S. District Court for the

District of Arizona had to decide whether a subrogation clause contained within the parties’

subordination agreement authorized NBA to vote on behalf of MMA.44 The clause stated that

MMA’s “claims” against the debtor were subrogated until the senior debt had been paid in full,

in cash.45 NBA argued that because MMA’s right to vote is part of the MMA’s “claim,”

subrogation necessarily granted it the right to vote on behalf of MMA.46

After the court found that the subrogation clause was valid under applicable non-

bankruptcy, it determined that that the right to vote is not a claim, rather “it is a derivative right

possessed by the holder of the claim.”47 Therefore, the second lien lenders right to vote, flowing

42 See Avondale Gateway Center Entitlement, LLC v. Nat’l Bank of Arizona, No. CV10-1772-PHX-DGC, 02-09-BK-12153-CGC, 2011 WL 1376997, at *2 (D. Ariz. Apr. 12, 2011). 43 In re Avondale Gateway Center Entitlement, L.L.C., No. 09-bk-12153-CGC, 2011 WL 6936526 (Bankr. D. Az. Dec. 27, 2011). The lenders held a first and second priority deed of trust, respectively. Like many real estate ventures from last decade, the value of the debtor’s project had cratered from over $40 million to around $15 million. See id. 44 Avondale Gateway, 2011 WL 1376997, at *1. “[T]he Bankruptcy Court held that the subrogation clause in the Subordination Agreement authorized NBA to vote on behalf of MMR, and struck MMA’s ballot, and accepted NBA’s ballot with two votes against the reorganization plan.” Id. “The Bankruptcy Court did not reach the issue of whether the subordination clause also gives NBA the right to vote on behalf of MMA.” Id. at n.3. 45 Id. at *2. 46 Id. at *2. 47 Id. at *2-3.


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from its claim in the debtor’s bankruptcy, could be assigned to the first lien lender.48 Next, the

court had to determine whether the subrogation clause was enforceable in bankruptcy. The court

first distinguished 203 N. LaSalle and Hart Ski, finding that “[i]n contrast to a subordinated

creditor, a subrogee steps into the shoes of the subroger and succeeds to the latter’s rights.”49

However, under applicable non-bankruptcy law, a subrogation agreement is not enforceable with

respect to non-assignable rights.50 In other words, “if a bankruptcy creditor’s right to vote a

reorganization plan were non-assignable, the Subrogation Clause would be unenforceable as to

that right.”51 Citing Aerosol Packaging and two additional cases,52 the court was persuaded that

voting rights were in fact assignable.53

IV. Conclusion – Which Approach is More Persuasive? The analysis in 203 N. LaSalle and its progeny is persuasive, but a court may decide to

follow Aerosol Packaging or Avondale Gateway.54 If courts trend towards a liberal construction

of § 510(a), thereby authorizing numerous provisions in intercreditor agreements, a second lien

lender might be left without recourse to control the treatment of its interests.55 As mentioned at

48 Id. at *3. 49 Id. at *4. 50 See id. at *4. 51 Id. 52 See In re Inter Urban Broad. of Cincinnati, Inc., Civ. A. Nos. 94-2382, 94-2383, 1994 WL 646176, at *2 (E.D. La. Nov. 16, 1994) (holding that the subordination agreement was enforceable, therefore the transfer of the second lien lender’s right to vote the claim was enforceable); In re Erickson Retirement Communities, LLC, 425 B.R. 309, 316 (N.D. Tex. 2010) (finding that a sophisticated commercial entity who knowingly waived many legal and statutory rights was bound to “standstill” under the subordination agreement, and therefore could not move for the appointment of an examiner). 53 In re Avondale Gateway Center Entitlement, 2011 WL 1376997, at *4. 54 See also In re Curtis Center Limited Partnership, 192 B.R. 648 (Bankr. E.D. Pa. 1996) (finding that the terms of the subordination agreement were fully enforceable in bankruptcy; a senior creditor was allowed to vote the junior creditor’s claim). 55 Cf In re TCI 2 Holdings LLC, 428 B.R. 117 (Bankr. D. N.J. 2010) (deciding that an intercreditor agreement did not bar the second lien lenders plan of reorganization)


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the beginning of this paper, there are no reported Circuit Court of Appeals decisions deciding

whether a second lien lender can pre-petition contractually assign their right to vote on a Chapter

11 plan of reorganization. In fact, the cases cited in this paper make up the majority of relevant

case law on the subject. Eventually, the issue will need to be resolved.

When it is taken up, there are two possible approaches: (1) pre-petition waivers of

bankruptcy-specific rights are generally unenforceable,56 and because § 1126(a) unambiguously

defines who may vote a claim, this bankruptcy-specific provision overrides any contractual

agreement altering who may vote a claim; or (2) drafters incorporated language expressly

trumping subordination agreements in two Code provisions,57 but failed to include such language

in § 1126(a). Because Congress chose not to include a similar clause in § 1126(a), it is

susceptible to manipulation.

To help clarify the situation, legislative history for § 510(a) could provide additional

insight into congressional intent. Accompanying the 1978 Code, the Senate Report states:

A subordination agreement will not be enforced, however, in a reorganization case in which the class that is the beneficiary of the agreement has accepted, as specified in proposed 11 U.S.C. 1126, a plan that waives their rights under the agreement. Otherwise, the agreement would prevent just what Chapter 11 contemplates: that seniors may give up rights to juniors in the interest of confirmation of a plan and rehabilitation of the detor.58

If the first sentence is construed to support 203 N. LaSalle and its progeny, second lien lenders

will rejoice. Multiple interpretations are certainly plausible, and any ambiguity could provide

fodder for lenders seeking to mute unfavorable interpretations of congressional intent. 56 See e.g., In re Cole, 226 B.R. 647, 651-52 n. 7 (B.A.P. 9th Cir. 1998), for discussion of numerous cases holding that a debtor cannot waive the rights bestowed upon it by the Bankruptcy Code. 57 See 11 U.S.C. § 1129(b)(1) (utilizing “[n]otwithstanding section 510(a)”); id. § 510(c) (utilizing “[n]otwithstanding subsections (a) and (b)“). 58 Senate Report No. 95-989, S. Rep. 95-989, 74.


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The issue of whether a pre-petition assignment of voting rights is enforceable in

bankruptcy is starting to become a topic of conversation. Recent case law (SW Boston Hotel and

Croatan Surf Club) definitively point in one direction, but without circuit precedent the issue

will continue to be ripe for future debate.

the assignment of voting rights in intercreditor agreements: enforceability and its impact on plan...

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