We followed up with Matthew Wiener, former Articles Editor, to discuss his new note, slated for publication in Volume 74 Issue 1.
What area of law do you currently practice?
I am an attorney at a law firm in New York City, and I practice in their credit group focusing on leveraged, asset-based and direct lending finance.
You were an Articles Editor on the Annual Survey of American Law during your time at NYU. How have the skills from your experience as an Articles Editor helped you in practice?
My position as an Articles Editor has helped me the most as an attorney by honing my ability to focus on detail in writing. A lot of the work I do today involves parsing long and complicated contracts. This requires a specific attention to language and punctuation, since small changes can have very significant impacts on the parties in the event of a dispute. I think that the experience I had reviewing articles, making Bluebook edits and ensuring that sources were used appropriately helped me build those skills in a way that I might not otherwise have.
Your note is titled “Cramdown Interest Rates in The Commercial Credit Context: Arguments for The Two-Step Approach in Chapter 11.” What made you interested in writing about chapter 11 bankruptcy and the appropriate market rate?
My background before law school is in environmental science, and I did environmental restoration work after I graduated. So while I originally wrote about this topic as part of a seminar I took in my first semester of 2L year, I never thought this would be a subject that would become such a significant part of my life. That changed once I took a class with Professor Marcel Kahan. The class focused on credit agreements and bond indentures, and Professor Kahan talked about the economics behind contract party relationships. In addition, he discussed the ways those parties could draft or manipulate ambiguities in contract provisions to take advantage of one another. During that class things just clicked, and the topic became much more compelling.
I later decided to take a course in bankruptcy with Professor Troy McKenzie. Bankruptcy added another layer of complexity to the contractual rules I had studied with Professor Kahan and solidified my interest in the field. As I learned more about credit agreements, bonds and the bankruptcy code, I would go back to the original seminar paper and layer in what I had learned. Summering at my firm also gave me a lot of insight into the way credit agreements are drafted in real time and how deals are structured, how interest rates are set and how the issues I studied in law school actually play out between borrowers and lenders. I was later able to incorporate that experience into my note.
This topic in particular is also cutting edge. The cases discussed in my note had a major impact and generated a lot of turmoil in the financial markets. It seemed like a good thing to sink my teeth into.
What are the reasons for employing the two-step approach you wrote about in your note?
The two-step approach is the best way to determine cramdown interest rates because its outcomes best reflect market reality (i.e., a negotiated rate of interest decided between willing, arm’s length participants). Compared to methods which permit greater judicial involvement, the two-step approach recognizes that courts should defer to efficient markets in deciding certain important finance-related questions.
How do the problems identified in your note effect the average American?
As the conversation surrounding the federal reserve and interest rates demonstrates, borrowing costs affect average Americans in many ways, such as by increasing mortgage rates, credit card bills and the price of staple consumer goods. However, interest rates can rise or fall due to factors aside from monetary or fiscal policy. To the extent the legal system becomes more hostile towards financial institutions (as would be the case if methods other than the two-step approach were widely employed) and the risk of lending increases, so too will the cost of borrowing. If companies have less access to affordable capital, they may invest in fewer new value-creating projects or produce fewer goods and services. As a result, the products they do produce will become more expensive and accessible to fewer people.