Hertz Ruling Keeps ‘Make-Whole’ Fee Focus on Solvent Debtors (1)

Bondholders’ recent appeals court victory against Hertz Corp. came because the car rental giant was solvent, but debate surrounding “make-whole” interest-like payments for certain creditors of insolvent companies is likely still on the table.

A three-judge panel of the US Court of Appeals for the Third Circuit ruled last week that Hertz must pay unsecured bondholders post-petition interest at the higher rate agreed to in their contracts, plus special make-whole fees, which are generally a lump sum or fee payment incurred if a borrower pays the debt off early.

The 2-1 majority, consistent with rulings from the Ninth and Fifth ...