497 B.R. 255
Bankr. E.D. Mich.2013Background
- Debtor Waterford Hotel, Inc. (owner/operator of a Holiday Inn Express) filed Chapter 11 on May 25, 2011; two individual shareholders had separate Chapter 7 discharges.
- Debtor proposed a 10‑year Fourth Amended Plan treating five classes: Dawn‑G (secured), general unsecured (Class 2, total $650,402.21 including Ammori’s $179,902.21), Yaldoo (deficiency), equity, and a county water/tax secured claim.
- Under the Plan Class 2 would receive a total of 1% of face value paid in 240 monthly installments without interest (e.g., Ammori would receive $1,799.02 over 20 years).
- Dawn‑G’s objection was resolved by a stipulated settlement providing payment of $3.2 million plus interest and monthly payments; all classes ultimately voted to accept the Plan.
- Ammori (unsecured creditor) objected to confirmation on five grounds (ambiguity, lack of interest/market rate, infeasibility, lack of good faith, and violation of the absolute priority rule); the court held an evidentiary hearing and received expert testimony addressing valuation, interest rate, and feasibility.
- The Court found the Plan feasible and proposed in good faith, overruled Ammori’s objections, and conditioned confirmation on a pre‑confirmation $200,000 cash infusion from related company K‑4 (to be transferred and evidenced by affidavits within 14 days).
Issues
| Issue | Ammori's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Ambiguity of Class 2 treatment | “1%” unclear (per installment/annual/total) | Plan language and numeric examples fix meaning: total = 1% of face value | Overruled — Plan unambiguous ($6,504 total to Class 2; Ammori $1,799.02) |
| Interest on unsecured claims | Plan must pay interest, at market rate | No legal requirement to pay interest on general unsecured claims absent cramdown on a solvent debtor | Overruled — no interest required here; not a cramdown/solvent case |
| Feasibility (§1129(a)(11)) | Debtor needs $200,000 outside infusion; K‑4 is insider/sham and unreliable | K‑4 willing/able to provide $200,000, has assets/income and guaranteed payments; projections (Ex. MM) support ability to perform | Overruled — Plan feasible; confirmation conditioned on K‑4 transferring $200,000 and affidavits within 14 days |
| Good faith and absolute priority | Plan not proposed in good faith; violates absolute priority | All classes accepted; §1129(b) cramdown/absolute priority not implicated; Plan furthers Chapter 11 objectives | Overruled — Plan proposed in good faith; absolute priority inapplicable because all impaired classes accepted |
Key Cases Cited
- In re Dow Corning Corp., 456 F.3d 668 (6th Cir. 2006) (discusses requirements for cramdown confirmation and payment in full with post‑petition interest where debtor is solvent)
- Teamsters Nat’l Freight Indus. Negotiating Comm. v. U.S. Truck Co., Inc., 800 F.2d 581 (6th Cir. 1986) (sets factors for feasibility analysis in plan confirmation)
- Danny Thomas Props. II L.P. v. Beal Bank, S.S.B., 241 F.3d 959 (8th Cir. 2001) (feasibility determinations must be rooted in objective facts)
- In re Bonner Mall P’ship, 2 F.3d 899 (9th Cir. 1993) (Chapter 11 purposes include preserving going concern value and maximizing assets for unsecured creditors)