A reader alerted me to the First Circuit Court of Appeal’s recent opinion in In re Bank of New England Corporation. (Go here for a PDF copy.) At issue was whether the junior debt was subordinate to post-petition interest accrued on the senior debt. The answer to that question hinged on a reference to “interest due or to be come due” in a set of junior indentures.
The district court concluded that the parties to the junior indentures didn’t intend to permit the holders of senior debt to receive post-petition interest before payment on the junior debt, and the First Circuit affirmed. Given the complexity of this litigation, I’ll limit myself to noting that the phrase “due or to become due” was insufficiently specific to avoid dispute in this case. (But I agree with my reader—it’s not ambiguous, although that’s how the court described it.)
And more generally, the structure X or to become X would seem to have the potential for mischief. It’s something I’ll be keeping an eye on.
