U.S. lawmakers likely to nix changes to debt restructuring law -source

Education Management

15/12/2015 22:20

By Trevor Hunnicutt, Tracy Rucinski  and David Lawder 
    WASHINGTON/NEW YORK/CHICAGO, Dec 15 (Reuters) - Lawmakers 
are likely to scrap a revision to certain legal protections for 
bondholders from a spending bill that was under negotiation, a 
congressional aide said on Tuesday. 
    Critics had said the changes under consideration to the 
Depression-era Trust Indenture Act (TIA) would strip bondholders 
of their right to challenge out-of-court restructuring deals and 
benefit private equity firms that are lobbying for the 
changes. urn:newsml:reuters.com:*:nL3N13W5Q9 
    Some of the largest U.S. fund managers opposed the revisions 
as "unwarranted and unanalyzed." A group of managers with 
combined assets under management of $7.3 trillion had sent a 
letter on Monday to top Democratic and Republican leaders 
expressing their concerns. 
    The letter was signed by BlackRock Inc  BLK.N , DoubleLine 
Group LP, Oaktree Capital Management LP, Western Asset 
Management Company, T. Rowe Price Group  TROW.O  and Pacific 
Investment Management Co, which is owned by Allianz SE 
 ALVG.DE . 
    A spokeswoman for Senate Democratic leader Harry Reid, who 
had backed the proposal, would not confirm or deny that the 
restructuring revisions had been pulled. Representatives for 
other top lawmakers did not respond to requests for comment. 
    The fund managers said any changes to the law, which 
lawmakers considered bolting on to a $1.15 trillion spending 
bill, should take place through a "transparent legislative 
process," echoing the concerns of 18 law professors who had 
asked in a separate letter for a more thorough analysis of the 
proposals.  
    Critics also warned on the proposed retroactive nature of 
the law, which could influence court decisions such as for 
casino operator Caesars Entertainment Corp  CZR.O , whose 
operating unit is in the middle of a litigious $18 billion 
bankruptcy. 
    Creditors have complained that Caesars did not guarantee the 
debt of its unit before filing for Chapter 11, a move they say 
violated the TIA. 
    The law has existed since the 1930s and guides debt 
restructuring, but recent interpretations cast uncertainty on 
its reach. 
    Caesars is owned by private equity firms Apollo Global 
Management  APO.N  and TPG Capital  TPG.UL , who are behind a  
lobby for the TIA to be amended. 
    Caesars, which has argued that lawsuits against its parent 
could push it into insolvency, was not available for comment. 
    A revised act could have affected other pending and future 
cases, including one between alternative investor Marblegate 
Asset Management LLC and for-profit educator Education 
Management Corp  EDMC.PK , which is partly owned by buyout firm 
KKR  KKR.N . 
 
 (Reporting by Trevor Hunnicutt in New York, Tracy Rucinski in 
Chicago and David Lawder in Washington; Additional reporting by 
Susan Cornwell in Washington; Editing by Meredith Mazzilli) 
 ((trevor.hunnicutt@thomsonreuters.com; +1 646 223 7914;)) 
 
Keywords: USA FISCAL/CONGRESS BONDHOLDERS