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Save the TIA!

posted by Stephen Lubben

So a brazen attempt to undermine the Trust Indenture Act of 1939 has failed, but you can expect the proponents will try again.

There is no way that Congress should be thinking about changing anything in the TIA without comprehensively studying our entire corporate reorganization system. The TIA intentionally makes it hard to restructure debt outside of bankruptcy. It was passed at the same time that corporate bankruptcy was federalized. The two systems are part of the same package, and can't be considered in isolation.

So if we think that the TIA needs to be "updated," let's discuss that in the proper context of the entire corporate restructuring system. But sneaking in amendments to unrelated bills is not how any responsible member of Congress should be proceeding on this issue.


Bad amendment and I am glad it got defeated. The TIA is an antiquated law but the real fix that needs to be made is very simply to lower the 100% threshold to a lower one, say 75% or higher. That way, holdouts could not obstruct the efficiency of broadly consensual out of court restructurings. This particular amendment was not a systemic fix but was clearly designed just to protect a couple of favored enterprises. The argument made that a bankruptcy of the parent would cost tens of thousands of jobs is an embarrassment. The retroactivity was also appalling.

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