Key takeaways:

• Two recent decisions by the District Court in the Southern District of New York adopt an expansive interpretation of the Trust Indenture Act as providing "a broad protection against non-consensual debt restructurings," potentially complicating future exchange offers and, in some cases, forcing bond restructurings that might currently be completed out-of-court to be effectuated through a bankruptcy filing.
• Although the facts in the two cases are extreme, the rationale of the decisions is extraordinarily broad and could reach modifications of noteholder rights commonly thought to be permitted under the Trust Indenture Act in the context of out-of-court debt restructurings, including automatic guarantee releases and other actions contemplated under an indenture.
• The decisions call into question the continued viability of exit consents as a restructuring tool, at least if coupled with other steps such as guarantee releases and transfers of assets out of the reach of dissenting bondholders, which may force more companies into bankruptcy or, at minimum, increase the execution risk and related costs of out-of-court bond restructurings.