462 B.R. 795
Bankr. D. Nev.2011Background
- LVMC owns/operates a 3.9 mile monorail project in Las Vegas and issued roughly $650 million in bonds to fund construction.
- LVMC's plan proposes to discharge debt with about $40.35 million in bonds, divided into Cash Pay, CapEx, and Capital Appreciation bonds.
- Bondholders voted overwhelmingly in favor of the plan (over 97% of voting bondholders representing over 92% of principal).
- The court must assess plan feasibility under 11 U.S.C. § 1129(a)(11), independent of creditor consent or votes.
- The projections show a $38.4 million shortfall at the final balloon payment, with upside scenarios relied upon by LVMC.
- The court finds the upside scenarios contingent and not credibly supported, and that the plan relies on future refinancing/financing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LVMC proves feasibility under §1129(a)(11). | LVMC argues projections suffice to show feasibility. | Bondholders contend projections are unreliable and insufficient for feasibility. | Not feasible; burden unmet; plan denied. |
| Whether LVMC's upside scenarios render the plan feasible. | Upside scenarios could cure the shortfall if realized. | Upsides are contingent and not within LVMC's control; not credible. | Upside scenarios not credible; plan remains infeasible. |
| Whether anticipated refinancing/grants provide concrete evidence of feasibility. | Funding via grants/financing is possible and should be considered. | Funding contingent on factors outside LVMC's control; not credible evidence. | Lack of concrete, proven funding evidence; not feasible. |
| Whether a drop-dead (liquidation) provision alone can rescue feasibility. | Liquidation option supports feasibility by providing exit if necessary. | Drop-dead provision does not alone prove feasibility. | Drop-dead clause insufficient; plan not feasible. |
Key Cases Cited
- Acequia, Inc. v. Clinton (In re Acequia, Inc.), 787 F.2d 1352 (9th Cir.1986) (feasibility burden on plan proponent by preponderance of the evidence)
- Liberty Nat'l Enters. v. Ambanc La Mesa Ltd. P'ship (In re Ambanc La Mesa Ltd. P'ship), 115 F.3d 650 (9th Cir.1997) (confirmations require plan to meet all §1129(a) requirements)
- Pizza of Hawaii, Inc. v. Shakey's, Inc. (In re Pizza of Hawaii, Inc.), 761 F.2d 1374 (9th Cir.1985) (§1129(a)(11) prevents confirmation of visionary schemes lacking cash flow)
- In re Vanderveer Estates Holding, LLC, 293 B.R. 560 (Bankr.E.D.N.Y.2003) (refusal to confirm where financing/refinancing is speculative)
- In re Walker, 165 B.R. 994 (E.D.Va.1994) (refusal to confirm where refinancing would be required but evidence lacks likelihood)
- In re Hoffman, 52 B.R. 212 (Bankr.D.N.D.1985) (plan feasibility cannot rely on unsupported future financing)
- In re Trans Max Techs., 349 B.R. 80 (Bankr.Nev.2006) (six feasibility factors used to assess plan)