Federal District Court Upholds Ruling that Distressed Debt Fund is Not a "Financial Institution"

Following a fact-specific analysis, the U.S. District Court for the Western District of Washington held that distressed debt funds were not “financial institutions,” as the phrase is used in an assignability limitation in the relevant loan agreement.  Accordingly, the District Court held that the distressed debt funds were not proper assignees of the loan and were not entitled to vote on confirmation of the debtor’s plan of reorganization.

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