Opinions of Interest – Ultra Petroleum Corp. and PG&E Corp.

In a recent article published by Law360, Mayer Brown’s Sean Scott, Aaron Gavant and Lisa Holl Chang break down recent decisions by the Fifth and Ninth Circuits relating to whether, in solvent debtor cases, unsecured creditors are entitled to postpetition interest in order to be deemed “unimpaired” under a plan of reorganization, and if so, what the proper rate of interest should be. The Fifth and Ninth Circuits ruled in the Ultra Petroleum and PG&E cases, respectively, that when a debtor has enough assets to pay creditors in full and make distributions to equity, unsecured creditors should receive postpetition interest at the full contractual or state judgment rates in order to be deemed unimpaired.  Whereas, a Delaware bankruptcy court recently ruled in the Hertz bankruptcy that the debtors were not required to pay unimpaired unsecured creditors more than the federal judgment rate (which is typically much lower than the contractual or state judgment rates).