In Re SW Boston Hotel Venture, LLC
460 B.R. 38
Bankr. D. Mass.2011Background
- Debtors SW Boston Hotel Venture and affiliated entities filed Chapter 11; plan aims to pay all allowed non-insider claims with income and asset sales.
- Prudential objected to confirmation, City of Boston supports; Committee and U.S. Trustee in play; three-day evidentiary hearing held in June 2011.
- W Hotel and condominiums were sold for $89.5 million; Prudential received approximately $83.3 million; sale proceeds impact allowed secured claims.
- Plan treats Prudential as Class 2 secured claim holder to be paid in full with interest and retain liens; City as Class 3 secured claim improves position pending full payment to Prudential.
- Debtors seek substantive consolidation under Section 5.8 to satisfy plan liabilities; Prudential challenges consolidation as improper.
- Bovis claim is separately classified in Class 6 per preexisting compromise; insiders SE Berkeley and SE McClellan receive equity interests in new entity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the plan meet confirmation requirements of §1129(a)? | Prudential contends plan fails several §1129(a) elements. | Debtors argue plan satisfies all §§1129(a) requirements with feasibility and fair treatment. | Yes; plan satisfies §1129(a) requirements. |
| Is Prudential's secured claim properly treated under §1129(b) cramdown? | Prudential asserts inadequate interest rate and unfair treatment, violating 1129(b)(2). | Debtors defend 4.25% rate under Till formula; retain liens and pay full amount with interest. | Yes; treatment satisfies fair and equitable cramdown requirements. |
| Is separate classification of the Bovis claim permissible? | Prudential argues misclassification harms creditors. | Bovis has lien/warranty distinctions justifying separate class per Granada Wines rationale. | Yes; separate classification permitted. |
| Is the plan's consolidation provision permissible? | Prudential contends consolidation breaches Third Circuit limits and creditor rights. | Plan consolidation justified to maximize recovery; certainty of joint and several liability preserved. | Yes; plan consolidation approved. |
| Do best interests, good faith, and absolute priority tests support confirmation? | Prudential asserts failure of best interests, good faith, and improper priority treatment. | Plan pays 100% of claims with interest; insiders subordinated; good faith supported by distribution scheme. | Yes; plan passes best interests, good faith, and absolute priority analyses. |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (U.S. 2004) (formulation for postpetition interest under cramdown)
- In re American HomePatient, Inc., 420 F.3d 559 (6th Cir. 2006) (market vs. formula approach for cramdown rate)
- In re Brice Road Devs., LLC, 392 B.R. 274 (Bankr. N.D. Ohio 2008) (formula approach adoption when no efficient market exists)
- Owens Corning, 419 F.3d 195 (3d Cir. 2005) (substantive consolidation principles; offensive vs defensive use)
- In re Ion Media Networks, Inc., 419 B.R. 585 (Bankr.S.D.N.Y. 2009) (absolute priority rule scope and unsecured treatment)
- In re 203 N. LaSalle Street P'ship, 246 B.R. 325 (Bankr. N.D. Ill. 2000) (subordination agreements and voting rights in bankruptcy)