454 B.R. 804
Bankr. D. Colo.2011Background
- Three related Chapter 11 cases involve a single asset project in Aspen and related entities: Land, Capital, and Development, with Land as the project owner and Aspen HH Ventures as a majority member in Capital.
- West LB AG holds senior and junior liens secured by deeds of trust and related guarantees; a receiver governs the project due to default on loans.
- Debtors sought post petition financing (DIP) and superpriority status; West LB opposed, arguing lack of adequate protection and priming risks.
- Prepetition waivers of the automatic stay were claimed by West LB as part of forbearance amendments; debtors argued such waivers are unenforceable and contrary to the Bankruptcy Code.
- Motions before the court include West LB relief from stay under § 361(d), a second DIP motion seeking superpriority financing, and Aspen HH’s request for a Chapter 11 trustee.
- Court held evidentiary hearing, considered stipulations and expert testimony, and issued rulings denying the DIP/priming relief, granting stay relief to West LB, and denying the trustee motion without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prepetition stay waivers are enforceable | West LB: waivers were bargained for forbearance and are enforceable. | Land, Capital, and Development: waivers conflict with the Code and public policy; not enforceable. | Prepetition waivers unenforceable, not enforceable to block relief from stay. |
| Whether relief from stay is justified under § 362(d)(1) for adequate protection | West LB: lack of adequate protection; value of collateral may decline; DIP is speculative. | Debtors: adequate protection via DIP, interim payments, and management; value may improve. | No adequate protection; relief from stay granted to West LB. |
| Whether relief from stay is justified under § 362(d)(2) due to lack of equity and necessity | West LB: no equity cushion; project not essential to a viable reorganization. | Debtors: project is necessary in single-asset case; ongoing project could support reorganization. | Lack of equity and lack of necessity established; relief from stay granted. |
| Whether the DIP / priming financing can be approved under § 364(c)-(d) | West LB: proposed priming financing is speculative and not adequately protected. | Debtors: need $5M DIP now with possible $35M later to fund completion; Colbeck commitment contemplated. | DIP financing denied; priming not justified; no indubitable equivalent offered; motion denied. |
Key Cases Cited
- In re Bryan Road, LLC, 382 B.R. 844 (Bankr.S.D.Fla. 2008) (forstay waivers: enforceable in appropriate circumstances; factors vary)
- In re Jenkins Court Assoc. Ltd. P'ship, 181 B.R. 33 (Bankr.E.D.Pa. 1995) (prepetition waivers not per se enforceable; context matters)
- United Savings Association of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988) (framework for 'necessity' and 'reasonable possibility' of reorganization)
- In re Anthem Communities, 267 B.R. 867 (Bankr.D.Colo. 2001) (guides on adequate protection and § 362(g) burden)
- Matter of Pease, 195 B.R. 431 (Bankr.D.Neb. 1996) (enforceability of stay waivers; policy considerations)