Divided First Department Holds That “Commits To Raise” Language Does Not Require A Binding Agreement

Posted: October 7, 2026 / Written by: Samuel L. Butt / Categories Contract Interpretation, Breach of Contract

Divided First Department Holds That “Commits To Raise” Language Does Not Require A Binding Agreement

On September 22, 2026, in Aurelius Capital Master Ltd. v. Hertz International Limited, Index No. 654710/21, Case No. 2025-00690, the Appellate Division, First Department affirmed a judgment of Justice Jennifer G. Schecter of the New York County Commercial Division that, after a nonjury trial, awarded plaintiffs approximately $15.9 million.

Plaintiffs, holders of a majority of notes issued by a European Hertz subsidiary, agreed during Hertz’s COVID-19-era chapter 11 case to backstop a €250 million issuance of new notes by defendant Hertz International Limited (HIL). The Backstop Agreement entitled plaintiffs to a 5% Alternative Financing Premium if, before the agreement expired on March 31, 2021, defendants or their affiliates “raise[d], or commit[ted] to raise,” alternative financing in lieu of the new notes. In late March 2021, Hertz’s U.S. debtors circulated a term sheet to prospective lenders, sought bankruptcy court authorization for a plan-sponsor agreement contemplating a €250 million HIL facility, and received executed equity commitment letters from new lenders. HIL itself did not sign a commitment letter until April 3, 2021. Defendants argued that “commits” required a binding agreement. Rejecting that argument, the majority explained:

Applying these principles, we find defendants’ interpretation untenable when read within the contract’s structure. The phrase “raises or commits to raise” is disjunctive. If “commit” required a binding agreement, “raise” would become surplusage. Reading the contract in this way violates the principle that contracts must be interpreted to give effect to all terms…The more coherent interpretation is that “commit to raise” encompasses significant affirmative steps toward securing alternative financing—even if not yet reduced to a binding agreement—so long as those steps reflect a defined intent to pursue the financing in lieu of the HIL notes. This interpretation aligns with the Backstop Agreement’s purpose: defendants could pursue cheaper financing but had to pay plaintiffs the AFP for assuming substantial risk in facilitating that restructuring path. . . .

If, as defendants suggest, the parties, which are commercially sophisticated entities, intended that entering into a binding agreement (orally or written) with a third-party lender or investor, prior to the ending of the Backstop Agreement, was an absolute requirement for triggering the duty to pay an AFP, they could have easily expressed their intent by using language of a binding promise. That the parties chose the term “raises or commits to raise,” rather than a binding promise, is a clear manifestation of an intent to trigger a duty to pay an AFP once defendants took affirmative steps to procure alternative financing prior to the expiration of the Backstop Agreement.

(Citations omitted).

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