Bankruptcy Advisory: Holders of “Dirt Bonds” May Lack Plan Voting Rights in Developer Bankruptcies
9/20/2011
By William W. Kannel and Ian A. Hammel
In a decision that may have implications for holders of community development district bonds and other similar “dirt bonds,” a Florida bankruptcy court has ruled that holders of community development district bonds do not always have plan voting rights when the underlying developer — as opposed to the development district itself — is the bankruptcy debtor. It remains to be seen whether parties with similarly structured bond obligations will attempt to use this decision to exclude bondholders from voting on bankruptcy plans that effectively restructure bond obligations.
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