Gordon Rees Scully Mansukhani, LLP
MONTH-IN-BRIEF (Jan 2026)
Recent Decisions Regarding Contract Interest Rates and Bar Dates
By Ashley Baird, New York University School of Law
This piece is part of a series of summaries of the leading cases decided in the last year and a half on bankruptcy.
In re Hertz Corporation, 120 F.4th 1181 (3d Cir. 2024)
Issues/Statutes: § 502(b)(2); Make-Whole Fees; Applicable Premiums; Contract Rates; Solvent Debtor; Definition of Interest
Hertz, the rental car giant, suffered serious financial troubles as a result of the COVID-19 pandemic and filed for Chapter 11 bankruptcy in 2020, seriously fearing insolvency. But as the economy bounced back, so did Hertz, and today it is solvent with a Chapter 11 plan promising to leave all of Hertz’s creditors unimpaired and, in fact, its stockholders richly rewarded. Among the creditors that Hertz claimed to leave unimpaired, however, were holders of unsecured bonds maturing annually from 2022 to 2028 (the “Noteholders”). Hertz repaid these bonds in full, prior to maturation, but (1) declined to pay the “make-whole fees” attendant upon the early pay-off of bonds, and which partially compensate Noteholders for lost interest income, and (2) paid interest at the lower federal judgment rate, not the contract-specified rate. These exceptions were permitted by the Bankruptcy Court, and the Noteholders, through Wells Fargo, appealed to the Third Circuit.