501 B.R. 441
Bankr. M.D. Fla.2013Background
- Debtor seeks to confirm a Chapter 11 plan over SPCP's objection; plan pays SPCP's secured claim (~$1.1M) over 25 years at 5% with a balloon at year five.
- Cramdown rate uses Till formula due to no efficient exit market; prime rate plus 1.75% risk adjustment yields 5% cramdown rate.
- Property is a Plant City, Florida real estate portfolio including a 7.13-acre site with a 40,420 sq ft shopping center, office, and rental home; current tenant mix and occupancy support projected cash flow.
- SPCP’s loan matured in 2011; refinancing failed; Bank of America loan later sold to SPCP; equity in property significant enough to justify reorganization rather than liquidation.
- Plan divides creditors into five classes; Class 3 (SPCP) is impaired and votes against the plan, but other classes vote in favor and 100% payment is promised; plan includes a bar order against non-debtor guarantors.
- Court will issue order overruling SPCP’s confirmation objections; plan deemed feasible, filed in good faith, satisfies best interests of creditors, and bar order is appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Feasibility of the plan, including balloon payment | SPCP contends plan not feasible due to balloon | Debtor can refinance balloon and generate sufficient cash flow | Plan feasible; refinancing likely and cash flow adequate |
| Appropriate cramdown interest rate | Unclear market; rate should reflect exit financing | Efficient market absent; Till formula applies with 5% rate | 5% cramdown rate established using Till formula (prime + 1.75% risk) |
| Good faith of the plan | Plan favors other creditors; potential bad faith | Plan satisfies purpose of Code; balloon payments customary; classification proper | Plan proposed in good faith; not a bad-faith filing |
| Best interests of creditors test | Plan does not maximize return for SPCP | Plan pays SPCP in full over term with balloon; better than liquidation | Best interests satisfied; plan pays all creditors in full |
| Bar order/non-debtor releases under §§ 105 and 524(e) | Bar order improperly restricts guarantors' rights | Bar order permissible to protect reorganization; not a discharge | Bar order approved; necessary to facilitate refinancing; limited by failure to default under plan |
Key Cases Cited
- Till v. SCS Credit Corp., 542 U.S. 465 (U.S. 2005) (adopted formula approach for cramdown interest rate; no efficient market needed in Till)
- In re Cypress Creek Assisted Living Residence, Inc., 434 B.R. 650 (M.D. Fla. 2010) (limitations on efficient market and Daubert assessment in cramdown feasibility)
- In re Munford, Inc., 97 F.3d 449 (11th Cir. 1996) (burden of proof for confirmation is preponderance of the evidence)
- In re Transit Group, Inc., 286 B.R. 811 (Bankr.M.D. Fla. 2002) (non-debtor releases/injunctions analyzed under §105 with §524(e) context)
- Texas Grand Prairie Hotel Realty, LLC, 710 F.3d 324 (5th Cir. 2013) (recognizes cramdown market considerations and feasibility in Chapter 11)