Involuntary debt restructurings that have the effect of impairing a bondholder’s right to receive payment may violate the Trust Indenture Act. This was recently held in the Marblegate/Education Management Corp. bondholder litigation. A first read of the case suggests potentially problematic implications. A deeper analysis shows a less troubling decision. The case is also relevant for the 144A for life market that is technically not subject to the statute.

- Involuntary debt restructurings may violate the Trust Indenture Act if they have the effect of impairing a bondholder’s right to receive payment, even though they leave that right formally intact. That was recently held by the court in the Marblegate/Education Management Corp. bondholder litigation. The SDNY’s recent opinion on the merits (Marblegate II) confirmed its earlier holding on a request for a preliminary injunction to block the restructuring (Marblegate I).