THOMAS KRELLER 

Partner 

2029 Century Park East | 33rd Floor | Los Angeles, CA 90067-3019 

T: 424-386-4463 

tkreller@milbank.com | milbank.com 

44553.00001

December 5, 2019 

VIA ELECTRONIC MAIL 

Hon. Dennis Montali 

United States Bankruptcy Judge 

450 Golden Gate Avenue, 16th Floor 

San Francisco, CA 94102 

Re: Consolidated Opening and Reply Briefs of the Creditor Groups Regarding the 

Appropriate Postpetition Interest Rate Payable on Unsecured Claims in a Solvent Debtor 

Cases (Docket Nos. 4634 and 4855, the “Creditor Groups’ Briefs”) 

Dear Judge Montali: 

The undersigned (collectively, the “Creditor Groups”) write to provide the Court with an 

update regarding an appellate decision issued since the Creditor Groups’ submissions to the Court 

regarding the applicable rate of postpetition interest payable on unsecured claims in a solvent 

debtor case (the “PPI Issue”). The appellate decision concerns a case cited both in the Creditor 

Groups’ Briefs and in the Debtors’ briefs. 

As you are likely aware, following a panel rehearing, the Fifth Circuit recently withdrew 

its initial opinion in Ultra Petroleum Corp. v. Ad Hoc Comm. of Unsecured Creditors of Ultra 

Res., Inc. (In re Ultra Petroleum Corp.), 913 F.3d 533, 546 (5th Cir. 2019) (“Ultra I”) and 

substituted it with a new opinion. See Ultra Petroleum Corp. v. Ad Hoc Comm. of Unsecured 

Creditors of Ultra Res., Inc. (In re Ultra Petroleum Corp.), 2019 WL 6318074 (5th Cir. Nov. 26, 

2019), attached hereto (“Ultra II”). This withdrawal and substitution occurred after the briefing of 

the PPI Issue had already concluded in these cases. 

In Ultra II, just as in Ultra I, the Fifth Circuit held that a creditor of a solvent debtor may 

not be impaired where it is denied an optional redemption premium or postpetition interest at the 

contract (or otherwise applicable state law) by the Bankruptcy Code, and not by the subject plan. 

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Hon. Dennis Montali 

December 5, 2019 

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The Fifth Circuit did not decide and remanded to the bankruptcy court the questions of whether 

the Bankruptcy Code did in fact require disallowance of those amounts.1

 

In Ultra II, however, it is notable that the Fifth Circuit also clearly identified that other 

avenues exist for creditors to establish contractual entitlements such as contractual postpetition 

interest in the solvent-debtor context. Specifically, the Fifth Circuit stated that: 

Our review of the record reveals no reason why the solvent-debtor exception could 

not apply. As other circuits have recognized, ‘absent compelling equitable 

considerations, when a debtor is solvent, it is the role of the bankruptcy court to 

enforce the creditors’ contractual rights.’ In re Dow Corning Corp., 456 F.3d 668, 

679 (6th Cir. 2006); see also In re Chicago, Milwaukee, St. Paul and Pac. RR. Co., 

791 F.2d 524, 528 (7th Cir. 1986). That might be the case here. 

Ultra II, 2019 WL 6318074, at * 6. 

Furthermore, the Fifth Circuit approvingly cited In re Energy Future Holdings Corp., 540 

B.R. 109, 123–24 (Bankr. D. Del. 2015) (finding that the debtor’s plan must pay postpetition 

interest on unimpaired unsecured claims “at an appropriate rate under equitable principles” in order 

to protect their “equitable rights”), noting that “[w]hile we express no view on the matter, it is 

possible a bankruptcy court’s equitable power to enforce the solvent-debtor exception is moored 

in 11 U.S.C. § 1124’s command that a ‘plan leave[ ] unaltered ... equitable ... rights.’” 2019 WL 

6318074, at *6, n. 2. 

The foregoing directly supports the Creditor Groups’ argument that creditors with contracts 

or other applicable state law rights must be paid postpetition interest (and other contractual 

entitlements) at the rates stated in those contracts or established by the applicable state law in order 

to be deemed unimpaired. See Opening Brief at 2. It also undercuts the Debtors’ assertion that 

cases like In re Dow Corning, which presume that solvent debtors must pay postpetition interest 

at a contract rate, are “irrelevant.” Debtors’ Opp. Br. at 11 n.8. 

Given the significance of the Fifth Circuit’s recent opinion in Ultra II, the Creditor Groups 

felt it was important to bring it to the Court’s attention so that it may take it into account when 

reaching a decision on the matter. 

Respectfully, 

MILBANK LLP 

/s/ Thomas Kreller 

Counsel for the UCC 

1 For the reasons set forth in the Creditor Groups’ Briefs, there is nothing in the Bankruptcy Code that 

impairs the right to receive postpetition interest in a solvent-debtor case consistent with a holder’s state law 

rights; section 726(a)(5) only provides a floor for the applicable rate for impaired unsecured creditors. 

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Hon. Dennis Montali 

December 5, 2019 

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GIBSON, DUNN & CRUTCHER LLP

/s/ David M. Feldman 

Counsel for the Ad Hoc Committee of Holders of Trade Claims 

ARENT FOX LLP 

/s/ Aram Ordubegian 

Counsel for BOKF, NA, in its capacity as Indenture Trustee for the Utility Senior Notes 

AKIN GUMP STRAUSS HAUER & FELD LLP 

/s/ Ashley Vinson Crawford 

Counsel for the Ad Hoc Committee of Senior Unsecured Noteholders of Pacific Gas and Electric 

Company 

DAVIS POLK & WARDWELL LLP 

/s/ Timothy Graulich 

Counsel for Citibank N.A., as Administrative Agent for the Utility Revolving Credit Facility 

STROOCK & STROOCK & LAVAN LLP 

/s/ Mark A. Speiser 

Counsel for Mizuho Bank, Ltd., in its capacity as HoldCo Term Loan Administrative Agent 

cc: Stephen Karotkin (stephen.karotkin@weil.com) 

 Cecily Dumas (cdumas@bakerlaw.com) 

Mark Speiser (mspeiser@stroock.com) 

 Timothy Graulich (timothy.graulich@davispolk.com) 

 Bruce Bennett (bbennett@jonesday.com) 

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