Restructurings present complex and fact intensive financial and legal issues that must be evaluated on a case-by-case basis. Releases generally play a key role in a restructuring. A release is a “jural act of high significance without which the settlement of disputes would be rendered all but impossible.” Berman v. Parco, 986 F.Supp. 195, 208 (S.D.N.Y. 1997).
The use of releases by the parties in a restructuring can help provide certainty and resolution, enabling the parties to turn the page and move on from a period of financial challenges. Releases of claims and causes of action are often heavily negotiated in restructurings, whether in- or out-of-court. Companies generally seek a fresh start and aim to avoid future indemnity claims and are therefore open to granting releases as appropriate to their key stakeholders (if appropriate under the circumstances). Relevant stakeholders in a restructuring — including the company, agents/indenture trustees, lenders, unsecured creditors, private equity sponsors and the company’s officers and directors — may seek releases when a company undergoes a restructuring in order to achieve their goals.
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