Perfection and Priorities: Lessons Learned from Philadelphia Energy Solutions
The pressure to “get the deal closed” and give up on important deal points in the course of intercreditor negotiations is often hard to resist. But resistance is not futile. Important priority rights in and to collateral, including insurance, must be preserved by standing firm on substance and making sure the deal is properly documented. This is particularly true when a transaction involves lenders with different priorities in a borrower’s property, and whether the transaction is a standard 1L/2L deal, a unitranche deal, or a split lien deal. The message was recently driven home once again by a decision addressing perfection and lien priority issues in a split lien deal, in the Philadelphia Energy Solutions (“PES”) chapter 11 cases.
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“Perfection and Priorities: Lessons Learned from Philadelphia Energy Solutions,” by Ira L. Herman and Mark I. Rabinowitz was published in the September 2020 edition of the ABA Commercial Law Newsletter, the joint newsletter of the Commercial Finance and Uniform Commercial Code Committees. Reprinted with permission.