Analysis: Chapter 11 Secured-Creditor
Cramdown Plans A.
Court of Appeals for the Fifth Circuit held that bankruptcy courts have flexibility in selecting the date on which to value collateral, "so long as the bankruptcy court takes into account the purpose of the valuation and the proposed use or disposition of the collateral at issue," In so holding, the Fifth Circuit rejected the proposition that a bankruptcy court must value collateral as of either the bankruptcy petition date or the effective date of a
cramdown Chapter 11 plan.
(4) See Norberg, supra note 3, at 424 ("By far, the most important of these incentives are the chapter 13
cramdown provisions which allow debtors to cure and reinstate home mortgages."); see also 11 U.S.C.
satisfy the
cramdown strictures by providing the indubitable equivalent
through a
cramdown restructuring in which the lender ends up with a
With the new bankruptcy law in place, Al-Gosaibi would be able to force dissident creditors to accept the terms, a practice known as "
cramdown" in the financial industry.
(25) Relevant for this article, are the following principles which aim to provide the same protection as the earlier defined equal ranking and equal treatment principles: (1) equal treatment of similarly situated creditors ([section] 1123(a)(4)); and, (2)
cramdown protection ([section] 1129(b)(2)) which includes the "fair and equitable" and the "not discriminate unfairly" or "unfair discrimination" rules.
In the second half of 2017, the distressed and restructuring communities witnessed a slew of key judicial opinions that concern some of the most material and contentious components of today's Chapter 11 landscape, including makewhole premiums and
cramdown interest rates (Momentive Performance Materials), nonconsensual third-party releases (Millennium Health) and plan gifting (Nuverra).
(discussing sale in
cramdown context); 7 COLLIER ON BANKRUPTCY, supra
(17) The "hanging paragraph" prevents a court from confirming a Chapter 13 plan that attempts to modify the value of a secured claim to the value of the underlying collateral pursuant to section 1325(b)(5)--otherwise referred to as "
cramdown"--if the underlying collateral meets specific qualifications.