## Facts

- UV Industries, Inc. issued multiple series of debentures under trust indentures naming Chase Manhattan Bank, N.A. and Manufacturers Hanover Trust Co. as trustees for debentureholders.
- The indentures contained (i) event-of-default and acceleration provisions and (ii) a standardized “successor obligor” clause allowing assumption of UV’s debenture obligations by a transferee that acquired “all or substantially all” of UV’s assets.
- UV adopted a plan to liquidate by selling its assets and distributing proceeds to shareholders.
- UV sold one major subsidiary for approximately $345 million (March 1979) and a second subsidiary for approximately $135 million (October 1979), distributing portions of proceeds to shareholders.
- In November 1979, UV sold its remaining operating assets to Sharon Steel Corporation, including a third subsidiary, certain mining properties, and substantial cash; the assets transferred represented about 51% of UV’s total asset value as of the start of the liquidation program.
- Sharon claimed it purchased all assets then remaining and therefore qualified as a successor obligor entitled to assume the debentures without triggering payment rights.
- The indenture trustees and debentureholders asserted the staged transactions were components of a single liquidation, that Sharon did not acquire “all or substantially all” of UV’s assets, and that the liquidation made the debentures immediately due and payable.
- The district court granted judgment for the trustees and debentureholders, concluding UV’s actions amounted to a liquidation and Sharon did not qualify as a successor obligor; Sharon and UV appealed.

## Issues

1. Whether Sharon’s purchase of UV’s remaining assets qualified as a transfer of “all or substantially all” assets under the successor-obligor clause, permitting Sharon to assume the debenture obligations.
2. Whether UV’s liquidation plan and staged asset sales triggered indenture provisions making the debentures immediately due and payable.
3. How standardized (“boilerplate”) indenture terms, including “all or substantially all” asset-transfer language, should be interpreted to maintain consistent meaning in public debt markets.

## Decision

- The Second Circuit affirmed judgment for the indenture trustees and debentureholders.
- The court held Sharon did not qualify as a successor obligor because it acquired only about 51% of UV’s asset base measured from the start of the liquidation plan, not “all or substantially all” of UV’s assets.
- The court treated UV’s sequential asset sales as integrated steps in a single liquidation, not isolated transactions for successor-clause analysis.
- The court held UV’s liquidation triggered debentureholder rights under the indentures, making the debentures due and payable rather than transferable to Sharon by assumption.
- The court emphasized that boilerplate indenture provisions should be construed uniformly to support predictable pricing and reliance in capital markets.

## Legal Principles

- Standard-form indenture provisions are construed to carry a stable, market-wide meaning; interpretation should not turn on deal-specific bargaining narratives absent clear textual variation.
- “All or substantially all” in a successor-obligor clause is assessed in economic substance; an issuer cannot satisfy the clause by first disposing of significant assets in a liquidation and then transferring only the remaining residue.
- Where a company undertakes a plan to liquidate through staged sales and shareholder distributions, courts may aggregate those steps when determining whether creditor-protection covenants and payment rights have been triggered.
- Successor-obligor clauses function as creditor protections tied to preservation of the asset base supporting the debt; they do not permit restructuring of debentureholders’ risk by partial-asset transfers during liquidation.

## Conclusion

The Second Circuit held that UV’s staged liquidation could not be used to recharacterize a partial asset transfer as a qualifying “all or substantially all” sale for successor assumption; Sharon therefore could not assume the debentures, and the liquidation entitled debentureholders to immediate payment under the indentures, with boilerplate clauses interpreted to maintain uniform market meaning.


Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982)