“One Year and a Day”

While rooting around on EDGAR, I spotted a kind of provision that uses the phrase “one year and a day.” Here are three examples:

Each of Folio and PMI hereby covenants and agrees that it will not institute against, or join or assist any other Person in instituting against, PFL any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceeding under the laws of any jurisdiction for one year and a day after all of the Borrower Payment Dependent Notes of PFL have been paid in full.

Each Holder of the Notes agrees, for the benefit of all Holders of the Notes, not to cause the filing of a petition in bankruptcy against the Issuer or any Permitted Subsidiary until the payment in full of the Notes and not before one year and a day, or if longer, the applicable preference period then in effect, has elapsed since such payment.

The Collateral Manager agrees not to cause the filing of a petition in bankruptcy against the Issuer for the nonpayment of the fees or other amounts payable by the Issuer to the Collateral Manager under the Collateral Management Agreement until the payment in full of all Notes issued under this Indenture and the expiration of a period equal to one year and a day, or, if longer, the applicable preference period, following such payment.

I asked Adrian Walters, bankruptcy guy and the man behind the blog The Walters Way, what he made of these provisions. Here’s his impromptu analysis:

1. We seem to be looking at a class of unsecured notes and there’s a concern (among other things?) about 547 preference clawback if it turns out that maturity/repayment occurred within the standard 90 day period or the extended 90 day to 1 year period for creditors who are insiders (?)

2. The outer boundary of preference risk is defined by the statute in 547(b)(4)(B). The thing bites on insider preferential transfers made “between ninety days and one year before the date of the filing of the petition…”

3. So does this have something to do with whether strictly you need the extra day? Let’s say the notes got paid in full on 1st Jan 2013 and the borrower filed on 1st Jan 2014. “Before” in the statute surely means you don’t count the date of filing.  You count backwards a whole year from the day before, Dec 31st, 2013. The year “before” therefore = 1st Jan to Dec 31st, 2013 and the payment occurred on Day One of the clawback period.

4. The clause says you can’t file for one year and a day “after” payment in full. On my hypo, “after” would mean you don’t start counting forward until 2nd Jan 2013 and the one year would run from 2nd Jan all the way through until 1st Jan 2013 inclusive.  A year and a day “after” would extend us to the anniversary of our starting date, 2nd Jan 2014. But in truth because the statute says “before” and the clause says “after”, then “one year after” will do perfectly well? Because our last day of preference risk is the anniversary of the payment and that’s by definition included within the “one year after”???

I agree with Adrian that it’s pointless to say “one year and a day.” “No earlier than one year after” would do the trick; it would mean that you’d have to wait for a year to pass before bringing a bankruptcy claim.

“One year and a day” has a fairy-tale vibe about it—it brings to mind “forever and a day.” It’s analogous to stating a time of day as 5:01 p.m., something I discuss in this 2012 post. An hour ends when the last second of the hour passes; you don’t add an extra minute. A year ends when the last second of the year passes; you don’t add an extra day.