Announcements
May 05, 2009

Kramer Levin Wins Seventh Circuit Reversal of United Airlines Bankruptcy Valuation

Kramer Levin has obtained a federal appeals court decision more than doubling the recovery of United Airlines bondholders based on the valuation of airport terminal space at Los Angeles International Airport (LAX). The United States Court of Appeals for the Seventh Circuit reversed a decision of the Northern District of Illinois (affirming the Bankruptcy Court) that had valued United's terminal space at LAX securing certain airport revenue bonds at approximately $33 million, finding that the fair market value of the terminals was enough to pay in full the approximately $60 million owed on the bonds, plus millions of dollars in accrued interest.

The Seventh Circuit's unanimous panel decision, authored by Chief Judge Frank Easterbrook, agreed with arguments advanced on appeal by Litigation partner Jeffrey S. Trachtman (who argued the case) and Corporate Restructuring and Bankruptcy partner Amy Caton that the Bankruptcy Court had inappropriately valued the terminal space based on a rental rate charged by the City for unimproved terminal space, rather than based on what the collateral-holder could charge in the marketplace for improved space. The Seventh Circuit also agreed that the Bankruptcy Judge had inappropriately applied a high discount rate in calculating the valuation that did not take account of the fact that the particular asset being valued -- terminal space in a fully occupied, key hub airport -- carried very low risk of failing to realize its full market value.

Corporate Restructuring and Bankruptcy partner P. Bradley O'Neill and associate Daniel M. Eggermann made significant contributions to the briefing on appeal.

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