The Prime Motor Inns landmark letter-of-credit case last month was decided in favor of bondholders, clearing the way for draws on six letters of credit and for investors to recover their principal.

The tax-exempt bonds last year became the object of a turf battle between bankruptcy law and bond law. After Prime Motor Inns filed for bankruptcy in Florida, the judge held that letter-of-credit draws violated the Bankruptcy Code, which upset the bond law presumption that letters of credit were safe from Chapter 11 proceedings.

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