In Re Mayslake Village-Plainfield Campus, Inc.
441 B.R. 309
| Bankr. N.D. Ill. | 2010Background
- Debtor Mayslake Village-Plainfield Campus, Inc. owns a 186-unit senior housing facility in Plainfield, IL and is tax-exempt under §501(c)(3).
- Property is valued at or below the lender’s claim and is burdened by Construction Notes totaling $30,129,134 secured by senior mortgage and leases/rents assignment.
- Affiliate Franciscan Tertiary Province of the Sacred Heart, Inc. guaranteed the Construction Notes and secured by a junior mortgage on Cloister Courts; Affiliate owes a separate Completion Line of Credit arrangement to the Lender.
- Lender filed foreclosure in 2009; Debtor filed Chapter 11 on November 16, 2009; Debtor proposed a Plan paying secured and unsecured claims over time, with Affiliate-related obligations determining some plan features.
- Plan contemplates retaining and operating the Property as not-for-profit, with internal allocations that prioritize the Affiliate’s and related entities’ interests, including injunctive releases; Plan seeks to treat the Affiliate’s Completion Line of Credit as a separate Class 7 claim.
- Court must determine whether the Plan satisfies §1129(a) and (b), particularly feasibility under §1129(a)(11) and fair and equitable treatment of the secured lender under §1129(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Feasibility of the plan under §1129(a)(11). | Lender contends projected payments are insufficient to fund confirmable plan. | Debtor argues projections show viable cash flow and adequate protection. | Plan not feasible; §1129(a)(11) not satisfied. |
| Fair and equitable treatment of secured claims under §1129(b). | Lender asserts plan subordinates Class 2/3 to Affiliate’s Class 7 and harms credit bid rights. | Debtor argues plan preserves liens and provides payment based on projected income. | Plan not fair and equitable; cram-down not warranted. |
| Valuation of the Property for plan purposes under §506(a)(1). | Lender argues lower foreclosure value; value should be $13.4M (not-for-profit replacement value). | Debtor argues $8.9M (for-profit) value; 506(a) dictates lower figure. | Higher value ($13.4M) applied for plan purposes. |
| Credit bid rights and post-petition sales under §363(k) and 1129(b)(2)(A)(ii). | Plan allows sale of encumbered property without credit bid protections. | Debtor asserts no explicit plan avoiding credit bid rights; Affiliate releases questioned. | Plan violates credit bid protections; cannot be confirmed. |
Key Cases Cited
- 203 N. LaSalle St. P'ship v. Stanley, 126 F.3d 955 (7th Cir. 1997) (establishes general plan-confirmation framework and cram-down standards)
- In re Vita Corp., 358 B.R. 749 (Bankr. C.D. Ill. 2007) (preference for confirming plans that meet 1129(a) with burden on proponent)
- In re Repurchase Corp., 332 B.R. 336 (Bankr.N.D. Ill. 2005) (burden of proof for plan compliance with 1129(a) and 1129(b))
- In re Rusty Jones, Inc., 110 B.R. 362 (Bankr.N.D. Ill. 1990) (confirmability standards under 1129(a) and (b))
- Airadigm Commc'ns, Inc. v. FCC, 547 F.3d 763 (7th Cir. 2008) (cram-down fairness and plan feasibility standards)
- Till v. SCS Credit Corp., 541 U.S. 465 (Supreme Court 2004) (formula approach for present value rate when no market rate exists)
- Rash v. Associates Commercial Corp., 520 U.S. 953 (Supreme Court 1997) (replacement value standard for secured claims in certain cram-down contexts)
- Till v. SCS Credit Corp. (Am. HomePatient), 420 F.3d 559 (6th Cir. 2005) (discussion of discount rates and Till methodology in Chapter 11)