In Re Pamplico Highway Development, LLC
468 B.R. 783
Bankr. D.S.C.2012Background
- Debtor Pamplico filed Chapter 11 and proposed the Second Modified Plan of Reorganization.
- First Citizens Bank holds Notes A and B secured by mortgages and rent assignments on two properties.
- Debtor defaulted on Note A and Note B prior to filing; bank sought stay relief, later resolved by consent order.
- Plan treats First Citizens’ claims under § 1111(b) electing secured status, with liens retained but paid via deferred cash with interest.
- Property values: American Drive Property $957,000 and Woody Jones Property $1,022,000; senior real estate tax liens total around $21,200 on each parcel; plan funding from Jack’s Place operations and rental income.
- Court must determine if Plan satisfies § 1129(a)/(b), including fair and equitable treatment of an electing creditor and present-value requirements.
- Expert testimony conflicted on appropriate interest rate; court ultimately applied Till formula-based rate to ensure present value.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plan is fair and equitable to the electing creditor under §1129(b). | First Citizens asserts lack of proper §1111(b) treatment. | Pamplico contends liens retained, total payments meet present value. | Plan is fair and equitable; objections overruled. |
| Whether interest payments may satisfy both total claim and present value under §1111(b). | First Citizens argues interest cannot double serve to satisfy claim and PV. | Debtor argues interest can be applied to principal to meet both requirements. | Court adopts majority view: interest may satisfy both total claim and present value. |
| What is the appropriate cram-down rate to provide present value under the Till formula when no efficient market exists? | First Citizens urges 6.25–6.75% or higher. | Debtor argues 5.5% with 2.25% risk premium suffices. | Court adopts 5.50% as appropriate under the Till formula, with 2.25% risk premium. |
| Does the plan require a note in face amount equal to the entire claim or is a below-market rate permissible? | First Citizens would require face-amount note; Debtor seeks premium and lien retention solution. | Plan provides §1111(b) premium and lien retention; no new note needed. | Court does not require a face-amount note; premium and lien retention satisfy §1111(b). |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (2004) (formula approach for present value in Chapter 11 cramdown)
- In re Brice Road Developments, LLC, 392 B.R. 274 (6th Cir. BAP 2008) (electing creditor present value and premium procedures under §1111(b))
- In re Weinstein, 227 B.R. 284 (9th Cir. BAP 1998) (present value requirement under §1129(b))
- In re Dunes Hotel Assocs., 188 B.R. 174 (Bankr.D.S.C.1995) (precedent on cramdown feasibility and §1129)