A Special Purpose CDO, an Involuntary Filing and a Single Lien Structure — Can an Investor “Create” an Unsecured Claim?

December 20, 2017

The U.S. Bankruptcy Court for the Southern District of New York recently addressed whether secured noteholders against a CDO can waive their entitlement to a portion of the collateral securing all notes issued under an indenture, such that they can file an involuntary petition against the CDO as holders of unsecured claims. Noting the novel issues involved, the Bankruptcy Court answered the question in the negative, at least at the motion for summary judgement stage. In re Taberna Preferred Funding IV, LTD., No. 17-11628-mkv (Bankr. S.D.N.Y. November 27, 2017).

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