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District Court Affirms Bankruptcy Court’s Award to Secured Creditor of Post-Petition Default Rate Interest

A recent decision of the Connecticut District Court awarded post-petition interest at the full default rate to a secured creditor. In Official Committee of Unsecured Creditors of Latex Foam International, LLC, et al. v. Entrepreneur Growth Capital, No. 21-cv-1311 (VLB) (D. Conn. March 8, 2023), Judge Vanessa Bryant of the United States District Court for the District of Connecticut affirmed the bankruptcy court’s ruling that awarded contractual default rate interest to a secured creditor in the post-petition period.

In awarding contractual default rate post-petition interest to a secured creditor, the district court added clarity to the framework for this analysis, concluding that a court should look to “equitable considerations,” particularly three key factors among the relevant circumstances.

In this Reuters article authored by Loeb & Loeb Restructuring & Bankruptcy partners Schuyler Carroll and Bethany Simmons and associate Noah Weingarten, the writers discuss Latex Foam, which makes clear that oversecured creditors whose agreements provide for default interest may be entitled to default rate interest in certain circumstances. In addition, they explore three significant questions regarding equitable factors and harm to unsecured creditors.