Chemtura: 'Make-Whole' and 'No-Call' Provisions

The Bankruptcy Court for the Southern District of New York's recent decision in In re Chemtura Corp., 439 B.R. 561 (Bankr. S.D.N.Y. 2010) (“Chemtura“) examines the treatment of “make-whole” and “no-call” provisions in bankruptcy proceedings in the context of a settlement of such claims pursuant to a plan or reorganization. Generally, a “no-call” provision prohibits the prepayment of debt prior to maturity while a “make-whole” provision acts as a liquidated damages clause and provides a mechanism for determining what amount a debtor must pay in order to prepay its debt prior to maturity. Ultimately approving the settlement without deciding on the enforceability of claims for “make-whole” amounts and damages for breach of “no-call” provisions, the Chemtura court conducted a thorough examination of recent case law and provided a detailed roadmap of the analysis it would conduct should the issues be litigated.