In Re Walkabout Creek Ltd. Dividend Housing Ass'n
460 B.R. 567
D.D.C.2011Background
- Walkabout I (100 units) and Walkabout II (65 units) are affiliated Michigan multi-family housing partnerships; MS HDA holds the sole secured claim under a Regulatory Agreement requiring below-market rent for some units.
- The complexes were purchased with MS HDA financing; each debtor operates under a Regulatory Agreement tied to rental subsidies based on area median income.
- Debtors filed voluntary Chapter 11 petitions on July 21, 2009; joint administration was approved August 3, 2009.
- Disclosures were approved in 2009–2010; confirmation hearings occurred May 5, 2010, with MS HDA opposing on multiple grounds.
- MS HDA challenges: (1) absolute priority under 11 U.S.C. §1129(b)(2)(B); (2) cramdown viability under §1129(b)(2)(A) given a 5% interest rate; (3) feasibility under §1129(a)(11).
- The court denied confirmation after applying the Till formula approach to determine an appropriate cramdown rate and finding the plan’s 5% interest insufficient; feasibility was also not proven.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the plan violates absolute priority rule | MS HDA contends 5.4–5.5 permit distributions to equity | Debtors claim no non-consenting unsecured class exists | No absolute-priority bar; no non-consenting unsecured class appeared. |
| Whether cramdown under §1129(b)(2)(A) is satisfied | MS HDA asserts interest rate too low for present value | Debtors rely on Till formula with risk adjustments | Cramdown not satisfied; 5% rate inadequate under Till-based analysis. |
| Whether the plan is feasible under §1129(a)(11) | Feasibility uncertain due to capital expenditures | Debtors presented budgets; projections credible | Feasibility not shown; plan denied. |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (U.S. Supreme Court, 2004) (establishes Till formula for cramdown interest rates (Chapter 13 context) and discussion of risk adjustment)
- In re American HomePatient, Inc., 420 F.3d 559 (6th Cir. 2005) (multifamily market for Chapter 11; distinguishes efficient market vs. formula approach)
- General Motors Acceptance Corp. v. Jones, 999 F.2d 63 (3d Cir. 1993) (discusses cost of funds concept in cramdown rate analysis)