In his decision this week, Judge Philip Bentley of the U.S. Bankruptcy Court in Manhattan ruled a bankrupt Holiday Inn in downtown Manhattan can’t use chapter 11 to maintain its low-rate mortgage without paying penalty interest linked to its default. The case arose after the owner failed to make payments on its loan after the hotel closed during the pandemic; lenders began charging default interest in response, leading the owner to file for bankruptcy in order to avoid a seizure. The decision cited two articles by Professor Ralph Brubaker from Bankruptcy Law Letter: "Default Rates of Interest and Cure of a Defaulted Debt in a Chapter 11 Plan of Reorganization (Part I): Entz-White’s Overlooked Choice of Law Dimension" (December 2016, Vol. 36, Issue 12) and "Default Rates of Interest and Cure of a Defaulted Debt in a Chapter 11 Plan of Reorganization (Part II): Entz-White and the 'Penalty Rate' Amendments" (January 2017, Vol. 37, Issue 1). Writing about the decision, the Wall Street Journal quoted Brubaker, who explained that this ruling could increase the costs for companies that were hoping to reinstate their cheap debt.

Read the Wall Street Journal article quoting Brubaker.

Read Judge Philip Bentley's ruling.

Read "Default Rates of Interest and Cure of a Defaulted Debt in a Chapter 11 Plan of Reorganization (Part I): Entz-White’s Overlooked Choice of Law Dimension."

Read "Default Rates of Interest and Cure of a Defaulted Debt in a Chapter 11 Plan of Reorganization (Part II): Entz-White and the 'Penalty Rate' Amendments."