Giving Bondholders a Vote in Debt Restructuring
ByMark J. Roe is a professor at Harvard Law School. He wrote “The Voting Prohibition in Bond Workouts,” published in The Yale Law Journal.
Congress is poised to retroactively validate hardball restructuring tactics in the bond market that courts have struck down in major reorganization cases like that ofCaesars Entertainment.
The underlying problem is that since the 1930s, the securities laws has barred basic free contracting among bondholders, via the Trust Indenture Act of 1939. Although the ban is exceedingly poor — one can think of few groups less in need of contractual guidance in the United States than institutional bondholders — the lurking amendment would worsen the plight of the bondholder…
Giving Bondholders a Vote in Debt Restructuring
