Cases & Deals

Non-agent lenders defeat Adelphia's claims

Client(s) Adelphia Non-Agent Secured Lenders

Jones Day represents approximately 400 lending institutions ("Non-Agent Lenders") in the Adelphia Communications bankruptcy case. Before Adelphia's bankruptcy filing, each of the Non-Agent Lenders had passively participated in one or more of Adelphia's six pre-petition credit facilities by purchasing Adelphia secured debt. In the ensuing bankruptcy case, each Non-Agent Lender was sued on claims of fraudulent transfer, preference, equitable subordination, and equitable disallowance. The Non-Agent Lenders' collective exposure was approximately $4.3 billion. While the claims against them were pending in the bankruptcy case, the lenders negotiated the terms of a plan that paid the Non-Agent Lenders a total of $4.3 billion (which amount constituted payment in full of their secured claims against Adelphia, together with interest and attorneys' fees), subject to the lenders' obligation to disgorge those payments if, and to the extent that, the estate prevailed on its claims against them. Ultimately, the Non-Agent Lenders prevailed on their motion to dismiss the estate's claims against them in the U.S. District Court for the Southern District of New York. The estate appealed that dismissal to the Second Circuit Court of Appeals, where the Non-Agent Lenders, represented by Jones Day, prevailed once again. Jones Day is also representing the Non-Agent Lenders in the underlying Adelphia bankruptcy case, where the Non-Agent Lenders are seeking the recovery of an additional $120 million in deferred interest payments from the Adelphia bankruptcy estate.