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1 Presenting a live 90 minute webinar with interactive Q&A Make Whole Provisions of Loan Agreements in Bankruptcy: Enforcement Challenges Maximizing Recovery for Lender and Noteholder Rights to Make Whole Premiums TUESDAY, AUGUST 20, pm Eastern 12pm Central 11am Mountain 10am Pacific Td Today s faculty features: Melinda C. Franek, Chevron Products Company, San Ramon, Calif. Vanessa G. Spiro, Partner, Jones Day, New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Make Whole Provisions Of Loan Agreements In Bankruptcy: Enforcement Challenges Melinda C. Franek, Senior Counsel Financial Services, Insolvency & Bankruptcy August 20, 2013 Tel The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Chevron U.S.A. Inc., its affiliates, or its employees Chevron

6 In re Calpine Corp. (Calpine I) 365 B.R. 392 (Bankr. SDNY 2007) Debtors were current on payments pre- and post-petition. Indenture provided that bankruptcy (BK) filing was event of default (EoD) resulting in acceleration; therefore, debt had accelerated and matured by virtue of the Debtors filing. Secured claim unavailable due to lack of explicit language providing for MW damages. However, court allowed unsecured claim for breach of contract/expectation damages Chevron 6

7 In re Solutia Inc. 379 B.R. 473 (Bankr. SDNY 2007) Filing of BK was EoD resulting in automatic acceleration. Cash collateral order provided for interest payments to noteholders. Noteholders sent notice of rescission of acceleration and waiver of default, but indenture only allowed deacceleration after notice of acceleration as opposed to automatic acceleration. In addition, the notice was void because it violated the automatic stay (noteholders did not move to lift stay). No post-acceleration yield maintenance formula in indenture; therefore, there were no dashed expectations for which compensation was due Chevron 7

8 In re Premier Entertainment Biloxi 445 B.R. 582 (Bankr. SD Miss. 2010) Notes accelerated automatically on filing of BK, moving the maturity date from 2/1/12 to the petition date. Noteholders could rescind acceleration and waive any EoD. A separate provision provided for prepayment premium if Debtor willfully caused notes to accelerate with intent of avoiding no-call provision. No specific language providing for premium after acceleration; however, in solvent debtor cases damages for breach of no-call provision are allowable. Distinguished Solutia, noting that indenture provided that all remedies were cumulative to the extent permitted by law Chevron 8

9 In re Calpine Corp. (Calpine II) 2010 U.S. Dist. LEXIS (SDNY 2010) No-call provisions became unenforceable once the Debtor filed for BK (i.e., under the BK code, you cannot prevent a Debtor from reorganizing and paying its creditors). Accordingly, gy there can be no damages that result from an unenforceable provision. In addition, payment did not result before maturity because accelerated debts are mature. No explicit provision in indenture providing for MW after acceleration. BK Court improperly awarded the noteholders unsecured damages in lieu of the stream of payments they expected to receive over the life of the loans Chevron 9

10 In re Chemtura Corp. 439 B.R. 561 (Bankr. SDNY 2010) Indentures did not contain MW provision that provided for prepayment premium on BK filing and automatic acceleration of debt. One indenture contained different definitions for Maturity and Maturity Date MW payable if payment before Maturity Date. Court persuaded by argument that BK automatic acceleration only accelerated Maturity. The Chemtura court believed that t the Calpine II analysis was flawed. Expressed concern about whether full MW would be penalty (but did not have to reach this issue). MW settlement amount was within the range of reasonableness under B.R Chevron 10

11 In re Trico Marine Services 450 B.R. 474 (Bankr. Del. 2011) Debtors made all payments when due. Obligations under indenture were unsecured, but were guaranteed by the Maritime Administration (MARAD). The MARAD guarantee was secured by a first-priority lien on two supply ppy vessels. Indenture also contained a MW provision. MW provision is akin to liquidated damages; court rejects argument that t MW is unmatured interest. t However, claim to MW was at best an unsecured claim notwithstanding the fact that MARAD required notes to be paid in full on sale of vessels in order to prevent noteholders from calling on the guarantee Chevron 11

12 In re AMR Corp Bankr. LEXIS 239 (Bankr. SDNY 2013) In 2009 and 2011, AMR negotiated 3 financing transactions, each of which was secured by designated aircraft. After filing for chapter 11, AMR sought authority to incur $1.5B of new financing to be used, in part, to refinance the prepetition notes. The indenture trustee argued that the payoff fell under the voluntary repayment section of the indentures, which required a MW premium to be paid. AMR asserted that the notes automatically accelerated as a result of the BK filing and in that situation the indentures explicitly provided that no MW was due. The court agreed with the debtors -- several provisions in the indentures were critical to the court s decision. The first provided that in the event of a bankruptcy acceleration: the unpaid principal amount of the [notes] then outstanding, together with accrued but unpaid interest thereon and all other amounts due thereunder (but for the avoidance of doubt, without Make-Whole Amount), shall immediately and without further act become due and payable[.] 2012 Chevron 12

13 In re AMR Corp Bankr. LEXIS 239 (Bankr. SDNY 2013) Faced with the unfavorable language, the indenture trustee argued that it could waive the bankruptcy default and decelerate the notes, thereby putting AMR in the position it would have been had it sought to refinance the notes before filing for bankruptcy. In addition, the indenture trustee argued that AMR s 1110 election effectively decelerated the debt. The court disagreed because: (i) 1110 does not require the debtor to cure a bankruptcy default and (ii) the statute was intended to be narrowly construed. As to the indenture trustee s request for relief from the stay, the court found it troubling that the noteholders only moved to lift the stay to serve a notice of rescission and deceleration after the issue was raised in oral arguments (late in the case) Chevron 13

14 Lessons from Case Law The express language of the debt instrument is the single most important factor in the analysis. Other questions/considerations: Unmatured interest subject to disallowance under 502(b)(2) of the Bankruptcy Code? Solvent debtor? Does premium amount to an impermissible penalty? Voluntary redemption rather than payment following acceleration? Timely enforcement of rights (AMR). Results driven analysis Chevron 14

15 MAKE WHOLE PROVISIONS OF LOAN AGREEMENTS IN BANKRUPTCY: ENFORCEMENT CHALLENGES Vanessa G. Spiro Partner, Banking & Finance Jones Day 222 East 41 st Street New York, NY The views expressed herein are those of the speaker only and do not constitute the views of Jones Day or any Jones Day client.

16 1. Premise of make whole provisions and other similar concepts: Protect lender in event of early repayment by requiring borrower to pay to lender the interest that would have otherwise accrued over the life of the loan. Historically, more prevalent in bond markets, other long term debt where investors seek long term deployment of capital at fixed rates Now, becoming more common in loan market 16

17 2. Other protections designed to protect lender against early repayment soft call hard call prepayment premiums upon certain events, such as change of control OID: OID (original interest discount): difference between the face amount of the debt issued and the money received by the debt issuer. 17

18 This amount amortizes over the term of the debt and thus resembles interest accrual. Often treated as interest in bankruptcy. Not a make whole per se, but related issues. In Re Solutia Inc., 379 B.R. 473, 486 (Bankr. S.D.N.Y. 2007) 18

19 The court held that a note issued at a discount is not allowable for its face amount. Rather, it is allowable at the face amount less the unaccrued portion of the OID. Post-effective date unearned OID is a disallowed claim as unmatured interest. Since the credit crisis, OID has been a common pricing feature in the loan market. 19

20 3. Considerations for drafting: Time period within which make whole to apply Amounts: what is the amount and how is it calculated Triggers for make whole payment Clarity that make whole is due if the debt is repaid after bankruptcy event acceleration. Market convention plays a role 20

21 Some examples from publicly l filed documents: In Re Solutia, 379 B.R. 473 (Bankr. S.D.N.Y. 2007) Noteholders sought prepayment premium owing upon a change of control under 2009 indenture triggered upon terms of the plan of reorganization. Court said holders need more than plain vanilla language such as the below: the Company shall pay the principal i of and interest t on the Notes on the dates and in the manner provided in the Notes and this Indenture. 21

22 General Maritime Corporation: $200 million secured credit agreement entered into May 2011 with an affiliated lender The prepayment premium language was located in the Event of Default section and expressly stated it was liquidated damages and not unaccrued interest: The Parties hereto agree that, pursuant to Section 4.01(f) [prepayments prior to second anniversary], any payment prior to the second anniversary of the closing date, whether arising out of acceleration, by virtue of payment pursuant to any plan of reorganization or otherwise, shall result in damages to lenders 22

23 which the parties hereto agree shall equal 10% of the principal amount to be repaid. The parent, borrower, and the other credit parties further agree that, without duplication of any penalty paid pursuant to Section 4.01(f), liquidated damages in an amount each to such 10% of the principal amount of obligations will be payable by Borrower to Lenders in the event that any payment is made arising out of events that occurred prior to the second anniversary of the closing date upon the earliest of (A) acceleration of the obligations, (B) an event of default pursuant to Section 10.05, and (C) payment pursuant to any plan of reorganization, liquidation, refinancing, reinstatement or payment of any other consideration. Was not challenged during the chapter 11 proceeding of this debtor 23

24 Homer City Funding (2012) As of the time of any acceleration of the Notes, the Redemption Premium applicable as of such time, as described in Sections 1.01 and 3.07, shall be due and payable, regardless of whether the Notes are actually called for redemption (which Redemption Premium is stipulated t and agreed to constitute t liquidated id d damages for the Holders for the loss of their investment opportunity and not a penalty), except with respect to any acceleration of the Notes resulting from: 24

25 (i) a failure by the Company or any of its Subsidiaries to comply with any covenant or agreement in this Indenture or the Notes that may be amended or supplemented with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding, voting as a single class, pursuant to Section 9.02 of this Indenture, other than those covenants and agreements set forth in (A) Section 4.08, 4.09, 4.14, 4.21 and 5.01 of this Indenture, or (B) Section 4.03, 4.10, 4.11, 4.12, 4.16, 4.24, 4.30 or 4.32 of this Indenture, to the extent such failure to comply resulted from intentional breach, bad faith or willful misconduct of the Company or such Subsidiary and such failure continues uncured for a period of sixty (60) days after receipt of a Notice of Default; 25

26 (ii) an Event of Default described in clauses (a) or (b) of Section 6.01 or a failure by the Company or any of its Subsidiaries to comply with any covenant or agreement in this Indenture or the Notes not covered by clause (b)(i) above, if (A) such default occurs at such time as $75 million of the Working Capital Facility has been advanced and remains outstanding (including in the form of undrawn letters of credit) and the Company has a cash balance of less than $50 million (excluding any amounts reserved for Debt Service Obligations), (B) such default may not reasonably have been avoided through the Company s exercise of its option to pay PIK Interest, and (C) no less than $325 million in reasonable and documented costs and expenses, including without limitation, any cancellation charges, shall have been incurred and paid by 26

27 General Electric Capital Corporation or any Affiliate thereof or by the EPC Agreement Obligor in connection with the installation of the Equipment (including all such reasonable and documented costs and expenses arising in connection with the BOP Agreements) (such amount being the Project Cost Threshold ); or (iii) a voluntary or involuntary filing for bankruptcy protection by or against any entity comprising the Company as a result of the Company s inability to pay its trade payables as they become due at any time after Substantial Completion for both Unit 1 and Unit 2 of the Facilities has occurred if such filing occurs at such time as $75 million of the Working Capital Facility has been advanced and remains outstanding (including in the form of undrawn letters of credit) and the Company has a cash balance of less than $50 million (excluding any amounts reserved for Debt Service Obligations). 27

28 In Re School Speciality, Inc WL (Bankr. D. Del. 2013) [on appeal] $70 million secured term loan agreement (May 2012) with Bayside Finance Definitions and related provisions for the make whole: Applicable Term Loan Percentage means, (i) with respect to any Early Fee Payment occurring from and including the 549 th day after the Closing Date to and including the 913 th day after the Closing Date, 6.0%, (ii) with respect to any Early Payment Fee Event occurring 28

29 from and including the 914 th day after the Closing Date and including the 1,338 th day after the Closing Date, 1.0%, and (iii) with respect to any Early Payment Fee Event occurring after the 1,338 th day after the Closing Date, 0.0%. Limited Call Period means the period from the Closing Date through and including the 548 th day after the Closing Date. Make Whole Amount means, with respect to any Called Principal of Term Loans, an amount equal to the Discounted Yield Value thereon for the Called Principal Determination Period. For the purposes of determining the Make Whole Amount, the following terms have the following meanings: 29

30 Applicable Percentage means 0.50% (50 basis points). Called Principal means, with respect to any prepayment of Term Loans pursuant to Section 2.9(b), and any prepayment of Term Loans pursuant to Section 2.9(a) (to the extent provided therefor in Section 2.09(c)(iii)), the principal p amount of such Term Loans so prepaid, p and in the case of Term Loans that are accelerated, or that have become or are declared to be immediately due and payable pursuant to Section 7.2 or otherwise, or in respect of which a claim has arisen in any Insolvency Proceeding, as the context requires the principal amount of the Term Loans so accelerated, or that have been declared, or have become, due and payable pursuant to Section 7.2, or as to which a claim has arisen in any Insolvency Proceeding. 30

31 Called Principal Determination Date means, with respect to any prepayment of Term Loans pursuant to Section 29(b) 2.9(b), and any prepayment of Term Loans pursuant to Section 2.9(a), (to the extent provided therefor in Section 2.09(c)(iii), the date of such prepayment, and in the case of Term Loans that are accelerated, or that have become or are declared to be immediately due and payable pursuant to Section 7.2 or otherwise, in respect of which a claim has arisen in any Insolvency Proceeding, as the context requires, the date of such acceleration, or that such Term Loans were declared d or become due and payable, or that t such claim in an Insolvency Proceeding arose, as applicable. 31

32 Called Principal i Determination ti Period means, as to any Called Principal and related Projected Interest Payments, the period from the relevant Called Principal Determination Date to December 31, Discounted Yield Value means, with respect to Projected Interest Payments on any Called Principle of Term Loans, the amount obtained by discounting the aggregate Projected Interest Payments that would accrue on such Called Principle during the Called Principle Determination Period therefor at a discount factor (applied on a quarterly periodic basis for each fiscal quarter during the Called Principal Determination Period) equal to the Reinvestment Yield with respect to such Projected Interest Payments. 32

33 Projected Interest Payments means, as to any Called Principal of Term Loans, the aggregate amount of interest that would accrue during the Called Principal Determination Period therefor assuming that (x) such interest would accrue on each day during such Called Principal Determination ti Period at the same rate of interest t as is applicable to the Term Loans hereunder on the relevant Called Principal Determination Date, such Projected Interest Payments to be calculated in the manner utilized in, and based on the methodology and assumptions implicit in, the hypothetical calculation prepared by the Administrative Borrower as an example and attached hereto as Exhibit S (it being agreed that the hypothetical Called Principal amount, interest rates and payment dates utilized in such hypothetical computation are not indicative of any actual Called Principal or Called Principal Determination Date or the actual interest rates that would apply on any actual Called Principal Determination Date as to any actual Called Principal) and (y) such Called Principal remained outstanding in full during the entire Called Principal Determination Period. 33

34 Reinvestment Yield means, with respect to Projected Interest Payments on any Called Principal, the sum of the (x) Applicable Percentage plus (y) the yield to maturity implied by (i) the yields reported as of 10:00 A.M. (New York city time) on the second Business Day preceding the applicable Called Principal Determination Date with respect to such related Called Principal, on the display designated as Page PXI (or such other display as may replace Page PXI) on Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity as close as practicable to December 31, 2015, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the applicable Called Principal Determination Date with respect to the 34

35 Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity as close as practicable to December 31, In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding paragraph, such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the applicable U.S. Treasury security with the maturity closest to and longer than December 31, 2015 and (2) the applicable U.S. Treasury security with the maturity closest to and shorter than December 31, The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate applicable pursuant to Section

36 Section 2.10 Payments. (g) Early Payment Fee. Each prepayment of Term Loans pursuant to Section 2.9(a), each prepayment of Term Loans pursuant to Section 2.9(b), and each repayment of, or distribution in respect of, Term Loans after acceleration thereof pursuant to Section 7.2 or such amount otherwise becoming or being declared immediately due and payable, an Early Payment Fee Event ), in each case shall be accompanied by, and there shall become due and payable automatically upon any such Early Payment Fee Event, a fee (the Early Payment Fee ) payable in cash on the principal amount so prepaid or on the principal amount that has become or is declared to be immediately due and payable pursuant to Section 7.2 or otherwise, or in respect of which such claim in any Insolvency Proceeding has arisen, or otherwise constituting Called Principal, as applicable, in an amount equal to (x) in the case of a 36

37 prepayment during the Limited Call Period (other than from the Net Cash Proceeds of a Permitted Divestiture (other than of the Designated Divestiture Business Unit) consummated prior to the first anniversary of the Closing Date), or an amount of Term Loans becoming due and payable pursuant to Section 7.2 or otherwise, in each such case during the Limited Call Period, the Make Whole Amount, and (y) in the case of a prepayment of the Term Loans from the Net Cash Proceeds of a Permitted Divestiture (other than of the Designated Divestiture Business Unit) consummated prior to the first anniversary of the Closing Date, 10.0% of the amount of such prepayment, and (z) in the case of a prepayment after the Limited Call Period or an amount of Term Loans becoming due and payable pursuant to Section 7.2 or otherwise, in each such case after the Limited Call Period, the Applicable Term Loan Percentage. 37

38 Events of Default: Section 7.2 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default (unless waived in writing by the Required Lenders), the Administrative Agent may (and, upon written request of the Required Lenders the Administrative Agent shall) exercise any or all of the following rights and remedies: (a) by notice to the Administrative Borrower, declare all or any portion of the Term Commitments, if then in effect, to be terminated, whereupon the same shall forthwith terminate; 38

39 (b) by notice to the Administrative Borrower, declare all or any portion of the unpaid principal amount of the Term Loans, all interest t accrued and unpaid thereon, and all other Obligations (including the Early Payment Fee) to be forthwith immediately due and payable or otherwise accelerated, whereupon the Term Loans, all such accrued interest and all such other Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Obligor. 39

40 Notwithstanding the foregoing, upon the occurrence of an Event of Default described in Section 7.1(e)(ii) (voluntary bankruptcy filing) hereof, the entire unpaid principal amount of the Term Loans and Term Notes, all interest accrued and unpaid thereon, and all other Obligations payable under this Agreement, shall be immediately due and payable, all Term Commitments, if then in effect, shall be terminated in full, in each case automatically and without presentment, demand, protest, notice or other requirement of any kind, all of which are hereby expressly waived by each Obligor. 40

41 Even though h $23.7 million premium represents 35% of the entire principal amount outstanding, court concluded it was not plainly disproportionate. p Important that drafting was clear on the issues of how much, when and whether h it was intended d that the make whole payment would become due and payable upon acceleration The court cannot, with the benefit of hindsight, alter the agreement based on subsequent operational results and managerial decisions. 41

42 In Re AMR Corp., 485 B.R. 279 (2013) (now before the Second Circuit) 3 different 2009 financing i transactions ti secured by aircraft. Voluntary redemption section provided that in the event of a voluntary redemption: [A]ll, but not less than all, of the Equipment Notes may be redeemed by the Company at any time upon at least 15 days revocable prior written notice to the Loan Trustee and the Noteholders, and such Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid principal amount 42

43 thereof, together with accrued and unpaid interest thereon to (but excluding) the date of redemption and all other Secured Obligations owed or then due and payable to the Noteholders, plus Make-Whole Amount, if any... ( EETC Indenture 2.11(a) (emphasis added); see also EETC Indenture 2.11(a); Secured Notes Indenture 2.20). But no such Make-Whole must be paid where certain kinds of defaults have occurred, including the filing of a bankruptcy as contemplated under Section 4.01(g) [emphasis added]: 43

44 The Event of Default section provided that: If an Event of Default shall have occurred and be continuing and so long as the same shall continue unremedied, then and in every such case the Loan Trustee may, and upon the written instructions of a Majority in Interest of Noteholders, the Loan Trustee shall, do one or more of the following to the extent t permitted by, and subject to compliance with the requirements of, applicable law then in effect: 44

45 (i) declare by written notice to the Company all the Equipment Notes to be due and payable, whereupon the aggregate unpaid principal i amount of all Equipment Notes then outstanding, together with accrued but unpaid interest thereon and all other amounts due thereunder (but for the avoidance of doubt, without Make-Whole Amount), shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived; provided that if an Event of Default referred to in Section 4.01(f), Section 4.01(g), Section 4.01(h) or Section 4.01(i) [bankruptcy events] shall have occurred and 45

46 be continuing, then and in every such case the unpaid principal amount of the Equipment Notes then outstanding, t together th with accrued but unpaid interest thereon and all other amounts due thereunder (but for the avoidance of doubt, without Make-Whole Amount), shall immediately and without further act become due and payable without presentment, demand, protest or notice, all of which are hereby waived... The plain language of the Indentures states no make whole is due when bankruptcy has caused acceleration. 46

47 BONUS: What would a court conclude? 1. Energy Future Intermediate Holding Company LLC and EFIH Finance Inc % Senior Secured Notes Due 2017 (First Lien) Indenture dated as of August 14, 2012 Section 6.02 Acceleration. If any Event of Default (other than an Event of Default specified in clause (6) or (7) of Section 6.01(a) hereof) occurs and is continuing under this Indenture, the Trustee or the Required Holders of at least 30% in aggregate principal amount of the outstanding Required Debt may declare the principal of, and premium, if any, interest, 47

48 BONUS: What would a court conclude? (cont d). Additional Interest, if any, and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Upon the effectiveness of such declaration, such principal and interest (including Additional Interest, if any) shall be due and payable immediately. The Trustee shall have no obligation to accelerate the Notes if and so long as committee of its Responsible Officers in good faith determines acceleration is not in the best interest of the Holders of the Notes. 48

49 BONUS: What would a court conclude? (cont d). Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) or (7) of Section 6.01(a) hereof [insolvency events], all outstanding Notes shall be due and payable immediately without further action or notice. 49

50 BONUS: What would a court conclude? (cont d). 2. Energy Future Intermediate Holding Company LLC and EFIH Finance Inc. 11% Senior Secured Second Lien Notes Due 2021 (Second Lien) Indenture dated as of April 25, 2011 Section 6.02 Acceleration. If any Event of Default (other than an Event of Default specified in clause (6) or (7) of Section 6.01(a) hereof) occurs and is continuing under this Indenture, the Trustee or the Required Holders of at least 30% in aggregate 50

51 BONUS: What would a court conclude? (cont d). principal amount of the outstanding Required Debt may declare the principal of and premium, if any, interest (including Additional Interest, if any) and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. 51

52 BONUS: What would a court conclude? (cont d). Upon the effectiveness of such declaration, such principal, premium, interest (including Additional Interest, if any) and such other monetary obligations shall be due and payable immediately. The Trustee shall have no obligation to accelerate the Notes if and so long as a committee of its Responsible Officers in good faith determines acceleration is not in the best interest of the Holders of the Notes. 52

53 BONUS: What would a court conclude? (cont d). Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) or (7) [insolvency events] of Section 6.01(a) hereof, all principal of and premium, if any, interest (including Additional Interest, if any) and any other monetary obligations on the outstanding Notes shall be due and payable immediately without further action or notice. 53