In Re 20 Bayard Views, LLC
445 B.R. 83
Bankr. E.D.N.Y.2011Background
- Debtor 20 Bayard Views, LLC filed Chapter 11 in Dec 2009 to reorganize a 62-unit Williamsburg condo project with 37 unsold units.
- Plan contemplates selling 27 of the 37 unsold units over five years and distributing proceeds to creditors, with WFF as the largest secured creditor objecting to confirmation.
- WFF holds a pre-petition secured claim secured by the Property, rents, and related guaranties; pendency interest for WFF was fixed at 24% after an evidentiary hearing.
- Post-petition, the Plan provides WFF 4.75% interest and a multi-year payoff schedule, plus WFF’s 25% of equity distributions and liens retention; administrative/priority claims funded by equity holder contributions.
- Court held a multi-day confirmation hearing; the plan was modified several times, and the record included appraisals, projections, and expert testimony on feasibility and value.
- Court concluded the Plan cannot be confirmed because it fails to provide WFF the present value of its claim under 1129(b)(2)(A)(i)(II).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Plan satisfies cramdown fairness and equity for WFF | WFF argues the Plan does not provide present value to its claim. | Debtor contends interest rate and structure meet fair and equitable treatment under 1129(b). | Not satisfied; cramdown present value not demonstrated. |
| Whether the Plan is feasible under 1129(a)(11) | WFF asserts feasibility depends on market sales and interest rate; projections are unreliable. | Debtor relies on management-approved Projections with independent validation showing positive five-year cash flow. | Feasibility established by preponderance of the evidence. |
| Whether the Plan is proposed in good faith under 1129(a)(3) | WFF claims plan reflects forbidden means and undisclosed side deals affecting equity. | Debtor asserts good faith shown by plan modifications and objective reorganization aims. | Plan proposed in good faith; consequences of side agreements do not render plan forbidden. |
| Whether 1129(a)(7) best interests test is satisfied for WFF | N/A or would prefer liquidation outcome as baseline. | Plan provides more than liquidation value to all impaired classes, including WFF. | Best interests satisfied; plan provides greater value than liquidation. |
| Whether the cramdown rate is appropriate under 1129(b)(2) | WFF argues for a higher rate (e.g., 11.68%) reflecting risk; seeks present value via higher interest. | Debtor advocates Till formula or market-based adjustment; claims 4.75% with risk premium insufficient per WFF. | Not appropriate; 1.5% risk premium deemed inadequate; cramdown interest rate fails to provide present value. |
Key Cases Cited
- Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988) (good faith standard informs confirmation analysis)
- Till v. SCS Credit Corp., 541 U.S. 465 (Supreme Court 2004) (formula approach for cramdown interest rate guidance)
- In re Cellular Info. Sys., Inc., 171 B.R. 926 (Bankr.S.D.N.Y. 1994) (market considerations in cramdown rate determination)
- In re American HomePatient, Inc., 420 F.3d 559 (6th Cir. 2005) (two-step approach to cramdown rate—market exists vs Till formula)
- In re DBSD North America, Inc., 419 B.R. 179 (Bankr.S.D.N.Y. 2009) (guidance on market rate vs Till formula in Chapter 11)
- In re Prussia Assocs., 322 B.R. 572 (Bankr.E.D. Pa. 2005) (Till formula framework considerations)
- In re Briscoe Enters., 994 F.2d 1160 (5th Cir. 1993) (preponderance standard for confirmation findings in cramdown context)