PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 16-1351

________________

In re: ENERGY FUTURE HOLDINGS CORP., 

a/k/a TXU Corp. a/k/a TXU Corp a/k/a/ Texas Utilities, et al., 

Debtors

DELAWARE TRUST COMPANY, 

f/k/a CSC Trust Company of Delaware, as Indenture Trustee,

Appellant 

v.

ENERGY FUTURE INTERMEDIATE HOLDING 

COMPANY LLC; EFIH FINANCE INC.;

AD HOC COMMITTEE OF EFIH UNSECURED 

NOTEHOLDERS

________________
2

________________

Nos. 16-1926, 16-1927 & 16-1928

________________

In re: ENERGY FUTURE HOLDINGS CORP.,

a/k/a TXU Corp. a/k/a TXU Corp a/k/a Texas Utilities, et al.,

Debtors

COMPUTER TRUST COMPANY, NA & 

COMPUTERSHARE TRUST COMPANY OF CANADA, 

Appellants 

v.

ENERGY FUTURE INTERMEDIATE HOLDING 

COMPANY LLC; EFIH FINANCE INC.

________________

Appeal from the United States District Court

for the District of Delaware

(D.C. Civil Action Nos. 1-15-cv-00620, 1-15-cv-01011, 

1-15-cv-01014 & 1-15-cv-01015)

District Judge: Honorable Richard G. Andrews

________________
3

Argued September 27, 2016

Before: AMBRO, SMITH, *

and FISHER, Circuit Judges

(Opinion filed November 17, 2016)

Philip D. Anker, Esquire (Argued)

Wilmer Cutler Pickering Hale and Dorr LLP

7 World Trade Center

250 Greenwich Street

New York, NY 10007

Danielle Spinelli, Esquire

Joel Millar, Esquire

David Gringer, Esquire

Isley Gostin, Esquire

Wilmer Cutler Pickering Hale and Door LLP

1875 Pennsylvania Avenue, N.W.

Washington, DC 20006

James H. Millar, Esquire

Drinker Biddle & Reath

1177 Avenue of the Americas, 41st Floor

New York, NY 10036

 

* Honorable D. Brooks Smith, United States Circuit Judge for 

the Third Circuit, assumed Chief Judge status on October 1, 

2016.
4

Todd C. Shiltz, Esquire

Drinker Biddle & Reath LLP

222 Delaware Avenue, Suite 1410

Wilmington, DE 19801-1612

Norman L. Pernick, Esquire

J. Kate Stickles, Esquire

Cole Schotz PC

500 Delaware Avenue, Suite 1410

Wilmington, DE 19801

Counsel for Appellant Delaware Trust Company

Daniel J. DeFranceschi, Esquire

Jason M. Madron, Esquire

Mark D. Collins, Esquire

Richards Layton & Finger

920 North King Street

One Rodney Square

Wilmington, DE 19801

Andrew R. McGaan, Esquire (Argued)

James H.M. Sprayregen, Esquire

Marc Kieselstein, Esquire

Chad J. Husnick, Esquire

Steven N. Serajeddini, Esquire

Kirkland & Ellis

300 North LaSalle Street, Suite 2400

Chicago, IL 60654

Edward O. Sassower, Esquire

Kirkland & Ellis LLP

601 Lexington Avenue
5

New York, NY 10022

Michael A. Petrino, Esquire

Kirkland & Ellis

655 15th Street, N.W., Suite 1200

Washington, DC 20005

Counsel for Appellees

Energy Future Intermediate Holding Company LLC;

EFIH Finance Inc.

Joshua K. Brody, Esquire

Gregory A. Horowitz, Esquire (Argued)

Thomas M. Mayer, Esquire

Jeffrey S. Trachtman, Esquire

Kramer Levin Natfalis & Frankel

1177 Avenue of the Americas

New York, NY 10032

Laura D. Jones, Esquire

James E. O’Neill, III, Esquire

Robert J. Feinstein, Esquire

Pachulski Stang Ziehl & Jones

919 North Market Street

P.O. Box 8705, 17th Floor

Wilmington, DE 19801
6

Stephanie Wickouski, Esquire

Bryan Cave LLP

1290 Avenue of the Americas

New York, NY 10104-3300

Counsel for Appellants

Computershare Trust Company, N.A.;

Computershare Trust Company of Canada 

________________

OPINION OF THE COURT

________________

Ambro, Circuit Judge

We address what happens when one provision of an 

indenture for money loaned provides that the debt is 

accelerated if the debtor files for bankruptcy and while in 

bankruptcy it opts to redeem that debt when another indenture 

provision provides for a redemption premium. Does the 

premium, meant to give the lenders the interest yield they 

expect, fall away because the full principal amount is now 

due and the noteholders are barred from rescinding the 

acceleration of debt? We hold no.

I. BACKGROUND

A. The Notes

Energy Future Intermediate Holding Company LLC 

and EFIH Finance Inc. (collectively, “EFIH”) borrowed in 

2010 approximately $4 billion at a 10% interest rate by 

issuing Notes due in 2020 and secured by a first-priority lien 
7

on their assets (the “First Lien Notes”). To protect (at least in 

part) the lenders’ anticipated interest-rate yield, the Indenture 

governing the loan (the “First Lien Indenture”) provides in 

§ 3.07, captioned “Optional Redemption,” that “[a]t any time 

prior to December 1, 2015, [EFIH] may redeem all or a part 

of the Notes at a redemption price equal to 100% of the 

principal amount of the Notes redeemed plus the Applicable 

Premium . . . and accrued and unpaid interest” (emphasis in 

original). “Applicable Premium” is what we shall call the 

make-whole, or yield-protection, contractual substitute for 

interest lost on Notes redeemed before their expected due 

date.

The First Lien Indenture contains an acceleration 

provision in § 6.02 that makes “all outstanding Notes . . . due 

and payable immediately” if EFIH files a bankruptcy petition. 

The same provision also gives the First Lien Noteholders the 

right to “rescind any acceleration [of] the Notes and its 

consequences[.]”

EFIH borrowed funds again in 2011 and 2012 by 

issuing two sets of Notes secured by a second-priority lien on 

its assets (the “Second Lien Notes”). As with the First Lien 

Noteholders, EFIH promised to pay holders of the Second 

Lien Notes (the “Second Lien Noteholders”) a make-whole 

premium—in a provision essentially identical to the one 

quoted above—if it chose to redeem the Second Lien Notes, 

at its option, on or before a date certain (May 15, 2016 for

Second Lien Notes set to mature in 2021 and March 1, 2017 

for those maturing in 2022).

The Indenture for the Second Lien Notes (the “Second 

Lien Indenture”) contains an acceleration provision different 

from § 6.02 of the First Lien Indenture: if EFIH files a 

bankruptcy petition, “all principal of and premium, if any, 

interest . . .[,] and any other monetary obligations on the 
8

outstanding Notes shall be due and payable immediately[.]” 

Second Lien Indenture § 6.02 (emphases added). Like the 

First Lien Noteholders, the Second Lien Noteholders have the 

right to “rescind any acceleration [of] the Notes and its 

consequences” under § 6.02.

B. Refinancing the First Lien Notes

When market interest rates went down, EFIH 

considered refinancing the Notes. Refinancing outside of 

bankruptcy would have required it to pay the make-whole 

premium. See In re Energy Future Holdings Corp., 527 B.R. 

178, 188 (Bankr. D. Del. 2015). By filing for bankruptcy, 

however, EFIH believed it might avoid the premium. So on 

November 1, 2013, it filed an 8-K form with the Securities 

and Exchange Commission “disclosing [its] proposal 

[whereby] . . . EFIH would file for bankruptcy and refinance 

the Notes without paying any make-whole amount.” Id.

(internal quotation marks omitted).

Six months later, on April 29, 2014, EFIH and other 

members of its corporate family filed Chapter 11 bankruptcy 

petitions in the Bankruptcy Court for the District of 

Delaware. Once in bankruptcy, EFIH sought to “take 

advantage of highly favorable debt market conditions to 

refinance,” beginning with the First Lien Notes. Id. at 189. It

asked the Bankruptcy Court for leave to borrow funds to pay

them off and to offer a settlement to any of its First Lien 

Noteholders who agreed to waive their right to the makewhole. Id. at 182, 189.

Fearing loss of the income stream EFIH had promised, 

the Trustee for the First Lien Noteholders—Delaware Trust 

Company—filed an adversary proceeding on May 15, 2014. 

It sought a declaration that refinancing the First Lien Notes 

would trigger the make-whole premium.
9

EFIH’s bankruptcy filing caused the “[First Lien] 

Notes [to] be[come] due and payable immediately” under 

Indenture § 6.02, subject to the right of their holders to 

rescind acceleration. So the Trustee also requested a 

declaration that it could rescind the First Lien Notes’

acceleration without violating the automatic stay of creditors’ 

acts to enforce their remedies once bankruptcy occurs, 11 

U.S.C. § 362. However, should the stay apply, the Trustee

asked the Court to lift it.

When the Bankruptcy Court did not act, on June 4, 

2014, the holders of a majority of the principal amount of the 

First Lien Notes sent a notice to EFIH rescinding 

acceleration, contingent on relief from the automatic stay. 

Two days later, the Bankruptcy Court granted EFIH’s motion 

to refinance. It ruled, however, that the refinancing would not 

prejudice the First Lien Noteholders’ rights in the pending 

adversary proceeding.

On June 19, 2014, EFIH paid off the First Lien Notes 

and refinanced the debt at a much lower interest rate of 

4.25%, saving “an estimated $13 million in interest per 

month.” In re Energy Future Holdings Corp., 527 B.R. at 

189. This of course disadvantaged the First Lien Noteholders,

who had contracted to receive interest at 10% until the Notes’ 

full maturity in 2020. EFIH did not compensate the loss set 

by contract by paying the make-whole, which would have 

been approximately $431 million.

C. Refinancing the Second Lien Notes

Shortly after entering bankruptcy, EFIH declared in an 

SEC 8-K filing that it “reserve[d] the right to . . . redeem . . . 

some or all of the outstanding . . . Second Lien Notes” but 

asserted that it “[wa]s under no obligation to do so.” See In Re 

Energy Future Holdings Corp., No. 14-50363 (Bankr. D. 
10

Del.), Docket Entry 181, A-222. Aware of this, as well as the 

First Lien Noteholders’ predicament, the Trustees for the 

Second Lien Noteholders—Computershare Trust Company,

N.A. and Computershare Trust Company of Canada—filed 

their own adversary proceeding on June 16, 2014.

Like the First Lien Trustee, the Second Lien Trustees 

sought a declaration that EFIH would have to pay the makewhole if it chose to refinance the Second Lien Notes. The 

Second Lien Noteholders also issued a notice rescinding 

acceleration of that debt and requested retroactive relief from 

the automatic stay so that the rescission could take effect.

With the Bankruptcy Court’s permission, EFIH 

refinanced a portion of the Second Lien Notes on March 10, 

2015—again without paying the yield-protection amount.

D. First Lien Make-Whole Litigation

Nine months after granting leave to refinance the First 

Lien Notes, the Bankruptcy Court considered whether EFIH 

had to pay the make-whole. In re Energy Future Holdings 

Corp., 527 B.R. at 191-95. The holding was that it did not. 

Id.

Although EFIH’s obligation to pay the make-whole 

appears in § 3.07 of the First Lien Indenture, the Court 

focused its reasoning on the acceleration provision in § 6.02. 

Because it took effect when EFIH entered bankruptcy but 

made no mention of the make-whole, the Court concluded 

that none was due. 1

 

1 For the purpose of determining EFIH’s duty to pay any 

make-whole, the Bankruptcy Court assumed that it was 

“solvent and able to pay all allowed claims of [its] creditors in 
11

It further held that the automatic stay prevented the 

First Lien Noteholders’ attempt to rescind the Notes’ 

acceleration. Id. at 197. Finally, after trial in 2015, it denied

the Trustee’s motion to lift the stay retroactively “to a date on 

or before June 19, 2014, to allow the Trustee to . . . decelerate 

the Notes.” In re Energy Future Holdings Corp., 533 B.R. 

106, 116 (Bankr. D. Del. 2015).

These rulings put the First Lien Noteholders in a 

Catch-22. When EFIH filed for bankruptcy, the maturity of its 

debt accelerated. This, according to the Bankruptcy Court, cut 

off the First Lien Noteholders’ right to yield-protection. 

Rescission of the acceleration would have restored that right. 

But rescission was blocked by the automatic stay, which the 

Court refused to lift.

The District Court for the District of Delaware 

affirmed the Bankruptcy Court’s rulings in February 2016. In 

re Energy Future Holdings Corp., No. CV 15-620 RGA, 

2016 WL 627343, at *1–3 (D. Del. Feb. 16, 2016).

E. Second Lien Make-Whole Litigation

The Second Lien Noteholders fared no better than the 

First Lien Noteholders. Six months after EFIH refinanced a 

portion of the Second Lien Notes, the Court considered the 

Second Lien Noteholders’ entitlement to the make-whole. In 

construing the Second Lien Indenture’s provisions, the Court 

adopted its findings and conclusions from the make-whole 

litigation for the First Lien Noteholders. After rejecting 

arguments based on the few differences between the First and 

 

full.” In re Energy Future Holdings Corp., 527 B.R. at 183. 

We do the same. Because we do not have any briefing on the 

matter even without that assumption, we do not consider 

whether insolvency might have affected EFIH’s obligations.
12

Second Lien Indentures’ texts, the Court held that the Second 

Lien Noteholders also were not entitled to yield-protection. In 

re Energy Future Holdings Corp., 539 B.R. 723, 733 (Bankr. 

D. Del. 2015). The District Court again affirmed. In re: 

Energy Future Holdings Corp., No. CV 15-1011-RGA, 2016 

WL 1451045, at *4 (D. Del. Apr. 12, 2016).

* * * * *

The First and Second Lien Trustees brought appeals on 

behalf of their respective Noteholders, which we 

consolidated. They argue the Bankruptcy and District Courts 

erred by holding that the Indentures did not require payment 

of the make-whole when EFIH redeemed the Notes after their 

maturity had accelerated.

II. JURISDICTION AND GOVERNING LAW

We have jurisdiction to hear appeals from the 

Bankruptcy and District Courts in this Circuit under 28 

U.S.C. §§ 158 and 1291. Statutory construction and contract 

interpretation are legal questions reviewed anew by us. The 

contracts at issue—the Indentures that control the Notes—are

governed by New York law. First Lien Indenture § 13.08; 

Second Lien Indenture § 13.08.

“When interpreting state law, we follow a state’s 

highest court; if that state’s highest court has not provided 

guidance, we are charged with predicting how that court 

would resolve the issue.” Illinois Nat. Ins. Co. v. Wyndham 

Worldwide Operations, Inc., 653 F.3d 225, 231 (3d Cir. 

2011). “To do so, we must take into consideration: (1) what 

that court has said in related areas; (2) the decisional law of 

the state intermediate courts; (3) federal cases interpreting 

state law; and (4) decisions from other jurisdictions that have 

discussed the issue.” Id.
13

Here we look to the New York Court of Appeals, 

which has held that “[t]he fundamental, neutral precept of 

contract interpretation is that agreements are construed in 

accord with the parties’ intent.” Greenfield v. Philles Records, 

Inc., 780 N.E.2d 166, 170 (N.Y. 2002) (internal citations and 

quotation marks omitted). “The best evidence of what parties 

to a written agreement intend is what they say in their 

writing.” Id. “It is the role of the courts to enforce the 

agreement made by the parties—not to add, excise or distort 

the meaning of the terms they chose to include, thereby 

creating a new contract under the guise of construction.”

NML Capital v. Republic of Argentina, 952 N.E.2d 482, 489–

90 (N.Y. 2011). “Adherence to these principles is particularly 

appropriate in a case like this involving interpretation of 

documents drafted by sophisticated, counseled parties and 

involving the loan of substantial sums of money.” Id.

III. ANALYSIS

A. The First Lien Indenture

Although both Indentures contains many provisions, 

this case centers on the words of but two: §§ 3.07 and 6.02.2

The former, noted earlier as titled “Optional Redemption,” 

states when the make-whole is due: “At any time prior to 

December 1, 2015, the Issuer may redeem all or a part of the 

 

2

In Sections A and B, we refer for convenience to the First 

Lien Indenture simply as the “Indenture.” Likewise, we mean 

the First Lien Notes and First Lien Noteholders when we 

refer to “the Notes” or “the Noteholders” in these Sections. 

Thereafter the two terms mean all debt instruments and their 

holders under both the First Lien and Second Lien Indentures, 

which themselves may be referred to collectively as the 

“Indentures.”
14

Notes at a redemption price equal to 100% of the principal 

amount of the Notes redeemed plus the Applicable Premium 

[i.e., the make-whole] . . . and accrued and unpaid interest”

(emphasis in original). Indenture § 3.07. The premium 

decreases annually on a sliding scale between December 1, 

2015 and November 30, 2018. From December 1, 2018 until 

the Notes’ maturity date in 2020, the Notes may be optionally 

redeemed without payment of a premium. See Indenture 

§§ 1.01 (defining “Applicable Premium” and providing 

formula for its application) & 3.07(d) (setting premium 

amount for redemptions after December 1, 2015).

Section 6.02 provides that on the filing of a bankruptcy 

petition by EFIH “all outstanding Notes shall be due and 

payable immediately without further action or notice.” 

Indenture § 6.02; see also id. § 6.01 (defining bankruptcy as 

an event of default).

Any duty to pay the make-whole comes from § 3.07. It 

leaves us with three questions: was there a redemption; was it 

optional; and if yes to both, did it occur before December 1, 

2015?

Section 3.07 does not define “redemption.” As a 

redemption “usu[ally] refers to the repurchase of a bond 

before maturity,” Black’s Law Dictionary 1390 (9th ed. 

2009), EFIH contends that we should limit the term to mean

only repayments of debt that pre-date the debt’s maturity. 

Section 6.02 accelerated the Notes’ maturity to the date EFIH

entered bankruptcy—April 29, 2014. It refinanced the Notes 

several weeks later. Thus it argues that its post-maturity 

refinancing was not a redemption.

But contrary to that position, New York and federal 

courts deem “redemption” to include both pre- and postmaturity repayments of debt. See e.g., Chesapeake Energy 
15

Corp. v. Bank of N.Y. Mellon, 773 F.3d 110, 116 (2d Cir. 

2014) (in interpreting New York law, to “redeem” is to 

“repay[] . . . a debt security . . . at or before maturity”

(quoting Barron’s Dictionary of Finance and Investment 

Terms 587 (8th ed. 2010)); Treasurer of New Jersey v. U.S. 

Dep’t of Treasury, 684 F.3d 382, 388 (3d Cir. 2012)

(discussing regulations permitting bondholders to “present . . .

long-matured savings bond[s] for redemption”); Fed. Nat’l 

Mortg. Ass’n v. Miller, 473 N.Y.S.2d 743, 744 (N.Y. Sup. Ct. 

1984) (“debtor may redeem” mortgage by “pay[ing] . . . 

accelerated debt”); see also N.Y. U.C.C. § 9-623, Official 

Comment No. 2 (“To redeem the collateral . . . of a secured 

obligation [that] has been accelerated, it would be necessary 

to tender the entire balance.”). Accordingly, EFIH’s June 19, 

2014 refinancing was a “redemption” within the meaning of 

§ 3.07.

Whether the redemption was “[o]ptional” is next up. 

EFIH argues that refinancing the Notes was not optional 

because § 6.02 made them “due and payable immediately 

without further action or notice” once it was in bankruptcy. 

EFIH, however, filed for Chapter 11 protection voluntarily. 

Once there, it had the option, per its plan of reorganization, to 

reinstate the accelerated Notes’ original maturity date under 

Bankruptcy Code § 1124(2) rather than paying them off 

immediately. It chose not to do so, and instead followed the 

path laid out six months before in its SEC 8-K filing.

EFIH contends nonetheless that any redemption was 

mandatory rather than optional. But this contention does not 

match the facts. Indeed “a chapter 11 debtor that has the 

capacity to refinance secured debt on better terms . . . is in the 

same position within bankruptcy as it would be outside 

bankruptcy, and cannot reasonably assert that its repayment 

of debt is not ‘voluntary.’” Scott K. Charles & Emil A. 
16

Kleinhaus, Prepayment Clauses in Bankruptcy, 15 Am. 

Bankr. Inst. L. Rev. 537, 552 (2007).

Events leading up to the post-petition financing on 

June 19, 2014 demonstrate that the redemption was very 

much at EFIH’s option. To repeat, months before its Chapter 

11 filing EFIH announced its plan to redeem the Notes before 

their stated maturity date. In re Energy Future Holdings 

Corp., 527 B.R. at 189. And after filing for bankruptcy, it 

produced another 8‐K stating that it may, “but [wa]s under no 

obligation” to, redeem the similarly situated Second Lien 

Notes. In Re Energy Future Holdings Corp., No. 14-50363 

(Bankr. D. Del.), Docket Entry 181, A-222.

The irony is that the Noteholders did not want to be 

paid back on June 19, 2014. They attempted to rescind the 

Notes’ acceleration on June 4, 2014, but were blocked by the 

automatic stay. In re Energy Future Holdings Corp., 533 B.R. 

at 108. When EFIH redeemed the Notes, it did so “on a nonconsensual basis,” that is, over the Noteholders’ objection. 

J.A. 1214. Logic leaves no doubt this redemption of the Notes 

was “[o]ptional” under § 3.07.

And, only to close the loop, all this occurred before 

December 1, 2015. Hence § 3.07 on its face requires that 

EFIH pay the Noteholders the yield-protection payment.

B. The Relationship Between §§ 3.07 And 6.02 (Or 

Whether § 6.02, Once Triggered, Annuls § 3.07)

At oral argument, EFIH’s counsel described §§ 3.07 

and 6.02 as “different pathways” that we must choose 

between. Only the latter is relevant, the argument goes,

because it addresses post-maturity payment more specifically 

than § 3.07, and specific contract provisions govern over 
17

more general ones. See Muzak Corp. v. Hotel Taft Corp., 133 

N.E.2d 688, 690 (N.Y. 1956).

It is not obvious why EFIH believes § 6.02 addresses

the consequences of the June 2014 redemption more 

specifically than § 3.07 or why we must choose between 

them. The two sections simply address different things: § 6.02 

causes the maturity of EFIH’s debt to accelerate on its 

bankruptcy, and § 3.07 causes a make-whole to become due 

when there is an optional redemption before December 1, 

2015. Rather than “different pathways,” together they form 

the map to guide the parties through a post-acceleration 

redemption. In any event, § 3.07 is the only provision that 

specifically addresses redemptions.

To support its position, EFIH looks primarily to In re 

AMR Corp., 730 F.3d 88 (2d Cir. 2013). It focused on an 

indenture’s acceleration provision to determine whether a 

make-whole was due. Crucially, however, that provision

addressed outright whether a make-whole would be due 

following acceleration.

“[I]f an Event of Default referred to in . . . 

Section 4.01(g) [i.e., the voluntary filing of a 

bankruptcy petition] . . . shall have occurred and 

be continuing, then and in every such case the 

unpaid principal amount of the Equipment 

Notes then outstanding, together with accrued 

but unpaid interest thereon and all other 

amounts due thereunder (but for the avoidance 

of doubt, without Make–Whole Amount), 

shall immediately and without further act 

become due and payable without presentment, 

demand, protest or notice, all of which are 

hereby waived.
18

Id. at 99 (emphasis added).

AMR is the easy case; just follow the text. The litigants 

took a route suggested by the New York Court of Appeals in 

NML Capital v. Republic of Argentina: parties that want

obligations to cease when accelerated should say so in their 

agreement. 952 N.E.2d at 490 (“Had Argentina intended that 

its responsibility to pay interest twice a year cease upon 

maturity, it could easily have clarified that intent in any 

number of ways.”).

In our case, § 6.02 makes no mention of the makewhole. EFIH argues that this silence saps § 3.07’s effect. On a 

general note, that reading would cross cords with our duty to 

“give full meaning and effect to all of [the Indenture's] 

provisions.” Chesapeake Energy Corp., 773 F.3d at 113-14 

(internal quotation marks omitted). “Contracts are . . . to be 

interpreted to avoid inconsistencies and to give meaning to all 

[their] terms.” Barrow v. Lawrence United Corp., 146 A.D.2d 

15, 18 (N.Y. App. Div. 1989). More specifically, EFIH’s 

interpretation conflicts with the New York Court of Appeals’ 

statement that “[w]hile it is understood that acceleration 

advances the maturity date of the debt,” there is no “rule of 

New York law declaring that other terms of the contract not 

necessarily impacted by acceleration . . . automatically cease 

to be enforceable after acceleration.” NML Capital, 952

N.E.2d at 492. Accordingly, § 3.07 stands on its own,

unswayed by the Indenture’s other provisions.

EFIH alternatively argues that §§ 6.02 and 3.07 are in 

conflict, so that only one may apply to the June 2014

redemption. Subsection 3.07(e) prescribes detailed notice 

procedures for EFIH to follow before redeeming the Notes, 

while § 6.02 makes the Notes “due and payable immediately 

without further action or notice.” If the notice procedures 

were not followed, no redemption could follow. Yet EFIH
19

offers no reason why it could not have complied with 

§ 3.07(e)’s notice procedures. In any event, it cannot use its 

own failure to notify to absolve its duty to pay the makewhole. Any conflict between the two provisions in this 

instance is illusory.

We know no reason why we should choose between 

§§ 3.07 and 6.02 when both plainly apply. By its own terms, 

§ 3.07 governs the optional redemption embedded in the 

refinancing and requires payment of the make-whole. It 

surpasses strange to hold that silence in § 6.02 supersedes 

§ 3.07’s simple script.

C. The Second Lien Indenture’s Additional 

Language

As mentioned above, the Second Lien Indenture’s 

acceleration provision contains words not present in the First 

Lien Indenture. These additions make explicit in the Second 

Lien Indenture the link between acceleration under §6.02 and 

the make-whole for an optional redemption per § 3.07. While 

for the First Lien Indenture these concepts are without crossreference and separate, in the Second Lien Indenture they are 

tied together. Sections 3.07 and 6.02 are not merely 

compatible but complementary. In any event, the result is the 

same no matter the Indenture—there were optional 

redemptions before a date certain, thereby triggering makewhole premiums.

When EFIH filed its bankruptcy petition, Second Lien 

Indenture § 6.02 caused “all principal of and premium, if any, 

interest . . . [,] and any other monetary obligations on the 

outstanding [Second Lien] Notes [to] be[come] due and 

payable immediately” (emphasis added). Compare First Lien 

Indenture § 6.02 (“all outstanding Notes shall be due and 

payable immediately”). The words “premium, if any,” are 
20

most naturally read to reference § 3.07’s “Applicable 

Premium”—that is, the make-whole.

The most EFIH musters is that the Second Lien 

Indenture could have been even more specific by replacing 

“premium, if any,” with “a premium owed under section 

3.07” or “Applicable Premium or other premium owed as if 

repayment under this section were an Optional Redemption 

under section 3.07.” EFIH’s Br. at 24-25. But we see no 

reason to demand such exactness. Indeed, EFIH has not

suggested any other “premium” the drafters could have had in 

mind.

True, in a case called Momentive, the Bankruptcy 

Court for the Southern District of New York held the words 

“premium, if any,” were not specific enough to require 

payment of a make-whole in similar circumstances. In re 

MPM Silicones, LLC, No. 14-22503-RDD, 2014 WL 

4436335, at *13 (Bankr. S.D.N.Y. Sept. 9, 2014), aff’d, 531 

B.R. 321 (S.D.N.Y. 2015) (“Momentive”). We believe, 

however, the result in Momentive conflicts with that

indenture’s text and fails to honor the parties’ bargain. For 

these and additional reasons discussed below, we find it

unpersuasive.

By including the words “premium, if any,” in its 

acceleration provision, the Second Lien Indenture leaves no 

doubt that §§ 3.07 and 6.02 work together. The latter is 

explicit that a premium is in play, and the only relevant

premium provision is the former. Thus both remained 

applicable following bankruptcy, and, pursuant to the 

agreement struck with the Second Lien Noteholders, they are 

entitled to the make-whole.
21

D. The Effect of Acceleration on Make-Whole 

Provisions

Notwithstanding the result dictated by § 3.07’s text in 

both Indentures, EFIH asserts that it should not have to pay 

the make-whole because § 6.02 caused the Notes’ maturity to 

accelerate before it paid them off. Citing a New York trial 

court opinion, Nw. Mut. Life Ins. Co. v. Uniondale Realty 

Assocs., 816 N.Y.S.2d 831, 836 (N.Y. Sup. Ct. 2006) 

(“Northwestern”), it argues that courts must close their eyes 

to make-whole provisions once a debt’s maturity has 

accelerated.

In interpreting laws of a state, we need not follow the 

judgments of its trial courts. See MRL Dev. I, LLC v. 

Whitecap Inv. Corp., 823 F.3d 195, 203 (3d Cir. 2016) (“The 

Superior Court of the Virgin Islands . . . is not the highest 

court of the Territory or even an intermediate appellate court, 

but rather a trial court. Accordingly, we are not bound by 

Superior Court decisions” (internal brackets, citations, and 

quotation marks omitted)). But even if we were inclined to do 

so here, EFIH’s interpretation of Northwestern conflicts with 

the pronouncements of New York’s highest court, which we 

follow on questions of New York law. See Illinois Nat. Ins. 

Co., 653 F.3d at 231.

As we noted above, the New York Court of Appeals 

stated unequivocally in NML Capital v. Republic of Argentina

that “[w]hile it is understood that acceleration advances the 

maturity date of the debt, [it was] unaware of any rule of New 

York law declaring that other terms of the contract not 

necessarily impacted by acceleration . . . automatically cease 

to be enforceable after acceleration.” 952 N.E.2d at 492. Put 
22

differently, contract terms like § 3.07 that are applicable

before acceleration remain so afterward.

In NML Capital, New York’s highest Court answered 

several questions certified to it by the U.S. Court of Appeals 

for the Second Circuit. Id. at 486. Among them was “whether 

Argentina’s obligation to make [certain contractually 

established interest] payments to bondholders continued after 

maturity or acceleration of the indebtedness[.]” Id. at 486. 

Argentina contended that, after the maturity of its debt had 

accelerated, bondholders were entitled only to their principal 

and any accrued interest. Id. at 490. Acceleration, it argued, 

terminated its duty to make biannual interest payments 

mandated by the bond documents. Id. at 487.

In rejecting those assertions, the New York Court of 

Appeals held that “in New York the consequences of 

acceleration of the debt depend on the language chosen by the 

parties in the pertinent loan agreement.” Id. at 492. “Had 

Argentina . . . intended that its responsibility to pay interest 

twice a year cease upon maturity, it could easily have

clarified that intent in any number of ways.” Id. at 490. For 

example, the bond documents could have specified that the 

payment “obligation continued ‘until’ the maturity date” or 

could have provided “that interest payments were to be made 

until the principal was due, thereby referring back to the loan 

maturity date.” Id. However, because the bond language that

Argentina pay biannual interest payments made no reference 

to acceleration or maturity, it remained effective following 

the bonds’ acceleration. Id. at 493. The takeaway for us is that 

§ 3.07 applies no less following acceleration of the Notes’ 

maturity than it would to a pre-acceleration redemption.

Despite the New York Court of Appeals’ holding in 

NML Capital and still riding the Northwestern horse, EFIH

contends that we should decline to require payment of the 
23

make-whole because the trial court declared that a 

“prepayment premium will not be enforced under default 

circumstances in the absence of a clause which so states[.]” 

Northwestern, 816 N.Y.S.2d at 836. It held that a mortgage 

lender who chose to foreclose following default was not 

entitled to a “prepayment premium” because foreclosure had 

advanced the debt’s maturity date. Id. “[P]repayment is a 

payment before maturity[,]” but after foreclosure prepayment 

is impossible as the debt has become due and payable 

immediately. Id. at 837 (emphasis in original). According to 

EFIH, Northwestern sets a rule that, unless an agreement

clearly provides for it, no make-whole payment is due after a 

note’s acceleration.

No doubt prepayment premiums are the price of “an 

option voluntarily to prepay the loan and terminate the 

mortgage before the maturity.” In re S. Side House, LLC, 451 

B.R. 248, 267 (Bankr. E.D.N.Y. 2011), aff’d sub nom, U.S. 

Bank Nat. Ass’n v. S. Side House, LLC, No. 11-CV-4135 

ARR, 2012 WL 273119 (E.D.N.Y. Jan. 30, 2012); accord 

Northwestern, 816 N.Y.S.2d at 836. “[A]cceleration, by 

definition, advances the maturity date of the debt so that 

payment thereafter is not prepayment but instead is payment 

made after maturity[,]” and logically the option to prepay can 

no longer be exercised after maturity. Matter of LHD Realty 

Corp., 726 F.2d 327, 330–31 (7th Cir. 1984); D.I.S., LLC v. 

Sagos, 832 N.Y.S.2d 581, 582 (N.Y. App. Div. 2007) 

(“prepayment” penalty did not apply to tender of mortgage 

principal and interest following acceleration because postacceleration payments are not “prepayments”).

Unlike prepayment, however, “redemption” of “a debt 

security” may occur “at or before maturity.” Chesapeake 

Energy Corp., 773 F.3d at 116 (emphasis added). Thus, while 

a premium contingent on “prepayment” could not take effect
24

after the debt’s maturity,3a premium tied to a “redemption” 

would be unaffected by acceleration of a debt’s maturity.

Our understanding of New York law is that it follows a 

logical path: prepayments cannot occur when payment is now 

due by acceleration of the debt’s maturity. If parties want to 

mandate a “prepayment” premium following acceleration, 

they must clearly state it in their agreement. This is the 

Northwestern rule.

Recently, however, bankruptcy courts, including the 

Bankruptcy Court here, have stretched Northwestern beyond 

its language and applied its clear-statement rule to yieldprotection payments not styled as prepayment premiums. In

the Momentive case we mentioned in our discussion of the 

Second Lien Indenture, a Bankruptcy Court considered 

language similar to that of both Indentures and nearly 

identical to the text of the Second Lien Indenture. Like the

Indentures here, the Momentive indenture required payment 

of a make-whole on optional redemptions occurring before a 

particular date. Momentive, 2014 WL 4436335, at *13. The 

Court, however, disallowed the lenders’ claim for a makewhole, declaring it “well-settled law in New York” that a 

make-whole, like a prepayment premium, will only be due on 

a default and acceleration “when a clear and unambiguous 

clause calls” for it. Momentive, 2014 WL 4436335, at *12-

*13 (citing Northwestern). The Delaware Bankruptcy Court 

followed the same line, declining to enforce the make-whole 

provision because “an indenture must contain express 

 

3 Even though a debtor cannot prepay what is already due, 

courts have enforced prepayment premiums after acceleration 

when the debtor has intentionally defaulted in order to avoid 

the premium. See e.g., In re S. Side House, LLC, 451 B.R. at 

269; Northwestern, 816 N.Y.S.2d at 836.
25

language requiring payment of a prepayment premium upon 

acceleration; otherwise, it is not owed.” In re Energy Future 

Holdings Corp., 527 B.R. at 192 (construing First Lien 

Indenture); accord In re Energy Future Holdings Corp., 539 

B.R. at 733 (construing Second Lien Indenture).

By denying the make-whole after the Notes’ 

acceleration, the Bankruptcy Court pushed the Northwestern

rule beyond its language and underlying policy concerns. 

First, its application of the rule is off point because § 3.07 in 

the Indentures does not use the word “prepayment.”

Northwestern responds, in part, to the linguistic paradox 

created by the idea of a prepayment following acceleration. 

“Once the maturity date is accelerated to the present, it is no 

longer possible to prepay the debt before maturity.” 

Northwestern, 816 N.Y.S.2d at 834. That is why, if parties 

want a “prepayment” premium to survive acceleration and 

maturity, they must clearly state it.

The Indentures here present no linguistic tension to 

resolve. Nothing in § 6.02 negates the premium § 3.07 

requires if an optional redemption occurs before a stated date. 

Acceleration here has no bearing on whether and when the 

make-whole is due.

EFIH argues that, even though § 3.07 does not use the 

word “prepayment,” the make-whole is in substance a 

prepayment premium, and thus the Northwestern rule should 

apply. But we must give effect to the “words and phrases” the 

parties chose. Chesapeake Energy Corp., 773 F.3d at 113–14; 

NML Capital, 952 N.E.2d at 489–90. By avoiding the word 

“prepayment” and using the term “redemption,” they decided 

that the make-whole would apply without regard to the Notes’ 

maturity.
26

Moreover, beneath the Northwestern holding was a 

policy concern that lenders should not be permitted “to 

recover prepayment premiums after default and acceleration 

in order to preserve an income stream . . . absent any 

‘voluntary’ prepayment.” Northwestern, 816 N.Y.S.2d at 836. 

There the mortgagee seeking the prepayment premium had 

elected to foreclose in order to recoup its investment 

immediately. Id. at 833. Ordinarily, by electing to accelerate 

the debt, a lender forgoes its right to a stream of payments in 

favor of immediate repayment. Matter of LHD Realty Corp., 

726 F.2d at 331 & n.4. The Northwestern Judge was 

concerned that lenders should not be able to seek immediate 

repayment and pile on by also receiving a premium. Here, by 

contrast, the Noteholders did not seek immediate payment. 

EFIH voluntarily redeemed the Notes over the Noteholders’ 

objection. Hence even the policy guiding Northwestern does 

not reach this case.

Finally, to repeat what we said at the outset, by 

declining to enforce § 3.07 after acceleration, the Bankruptcy 

Court ran afoul of New York authority by failing to enforce a 

contract provision—§ 3.07—not affected by acceleration. 

NML Capital, 952 N.E.2d at 492. To reach its conclusion, it

followed Momentive, which described “automatic 

acceleration clauses” as “negating” the effect of make-whole 

redemption provisions. Momentive, 2014 WL 4436335, at 

*14. That is not what NML Capital tells us.

EFIH answers that the Noteholders should have taken 

note of bankruptcy courts’ novel application of Northwestern

and insisted on clearer language in the Indenture. See e.g., In 

re Anchor Resolution Corp., 221 B.R. 330, 334 (Bankr. D. 

Del. 1998) (“If the maturity of any Series B Note shall be 

accelerated . . . [,] there shall become due and payable . . . as

compensation to the holders . . . a premium equal to the 

Make-Whole Amount.”). But this puts the burden backward;
27

if EFIH wanted its duty to pay the make-whole on optional 

redemption to terminate on acceleration of its debt, it needed 

to make clear that § 6.02 trumps § 3.07. See NML Capital,

952 N.E.2d at 490. The burden to make that showing is with 

EFIH. To place it on the Noteholders for EFIH’s decision to 

redeem the Notes is a bridge too far.

* * * * *

Our “primary objective . . . is to give effect to the 

intent of the parties as revealed by the language of their 

agreement.” Chesapeake Energy Corp., 773 F.3d at 113–14.

The language of the First Lien Indenture requires EFIH to pay 

a make-whole if it redeems the First Lien Notes at its option

before December 1, 2015, and the Second Lien Indenture 

requires the same for redemptions of Second Lien Notes 

before May 15, 2016 or March 1, 2017 (depending on the 

initial maturity date of the particular debt instruments). EFIH

redeemed the First Lien Notes at its option on June 19, 2014

and redeemed a portion of the Second Lien Notes on March 

10, 2015. Redemptions, not prepayments, occurred here, they 

were at the election of EFIH, and they occurred before the 

respective dates noted. Statements of New York law by its 

highest Court and the federal Circuit Court in New York 

reinforce our conclusion that EFIH must pay the make-whole

per the Indenture language before us.

4

 

4 Because we hold that the Noteholders are entitled to the 

make-whole, we do not reach the Trustees’ alternative 

arguments that the Bankruptcy Court should have lifted the 

automatic stay to permit rescission of the Notes’ acceleration 

or that the Court should have allowed the Noteholders a 

contingent claim for the make-whole or a claim for contract 

damages.
28

The judgments of the District Court are reversed with 

instructions to remand to the Bankruptcy Court for further 

proceedings consistent with this opinion. Any future appeals 

shall return to this panel.