524 B.R. 889
Bankr. N.D. Ga.2014Background
- Debtor: a Georgia non-profit cooperative owning 238 low/moderate-income apartments in Atlanta, operating under a HUD Section 8 contract. Debtor filed Chapter 11 on November 25, 2013.
- Major creditor: Fannie Mae holds a $5,012,392.86 claim (secured portion $4,956,395.11) and objected to confirmation of Debtor’s amended plan.
- Plan: five-year cash-flow plan to pay creditors in full; treats Fannie Mae as secured Class 1 and proposes a 360-month New Note with 6 months forbearance during which ~$164,216 would be used to renovate 29 vacant units to reach 90% occupancy.
- Debtor’s projections rely on renovating 29 units to increase rent revenue by $11,739/month; classes 2A, 2B, 3 and 4 voted to accept the Plan; Fannie Mae voted against it.
- Evidence: contractor estimated unit repairs ~$162,635 (plus ~$26,450 exterior safety work) but acknowledged uncertainty; Debtor’s manager supervised budgets but monthly operating reports showed negative net operating income in 5 of 8 months and declining bank balances, with virtually no cash reserves.
- Procedural posture: Confirmation hearing held Sept. 17, 2014; Court entered findings under Fed. R. Bankr. P. 7052/9014 and denied confirmation for lack of feasibility under 11 U.S.C. § 1129(a)(11).
Issues
| Issue | Debtor's Argument | Fannie Mae's Argument | Held |
|---|---|---|---|
| Feasibility under §1129(a)(11) — is confirmation likely to avoid liquidation or further reorganization? | Deferred 6-month payments to Fannie Mae will fund $164,216 for renovating 29 units, achieving 90% occupancy and increased revenues to service the New Note. | Debtor lacks cash reserves, has negative operating results, unreliable projections, and insufficient evidence that renovations and occupancy increases will occur. | Denied. The Plan is not feasible: projections unsupported, negative operating history, inadequate cash, and budget unreliability. |
| Cramdown under §1129(b) — is the plan fair and equitable to objecting secured creditor? | (Implicit) If feasible, the New Note and proposed treatment satisfy cramdown standards. | Plan not fair and equitable because it is not feasible; cramdown standards need not be reached. | Not addressed on merits because feasibility failure precludes confirmation; cramdown not reached. |
Key Cases Cited
- Acequia, Inc. v. Clinton, 787 F.2d 1352 (9th Cir. 1986) (debtor bears burdens of production and persuasion on confirmation requirements)
- Ambanc La Mesa Ltd. P’ship v. W. Dev. Corp., 115 F.3d 650 (9th Cir. 1997) (nonconsensual confirmation under §1129(b) requires compliance with §1129(a) factors)
- L & J Anaheim Assoc. v. Aetna Life & Cas., 995 F.2d 940 (9th Cir. 1993) (standards for cramdown and fair-and-equitable tests)
- Beal Bank, S.S.B. v. Waters Edge Ltd. P’ship, 248 B.R. 668 (Bankr. D. Mass. 2000) (confirming that §1129(a) requirements must be satisfied before cramdown analysis)