The Enforceability of Make-Whole Premiums in Bankruptcy


Gary Rosenbaum, Jeremy Johnson and Gregory Kopacz wrote this bylined article on so-called make-whole premiums as a point of controversy between lenders and unsecured creditors in bankruptcy cases. “Financing agreements frequently contain ‘make-whole’ or prepayment fees to protect a lender’s right to the yield for which it contracted,” which can mean that unsecured creditors “are looking at less than a full recovery on their claims,” the authors wrote. They explained how “careful and precise drafting can eliminate much of the uncertainty surrounding make-whole and prepayment provisions and the risk of costly attendant litigation.”