MEMORANDUM DECISION
This case involves related appeals from proceedings in the United States Bankruptcy Court for the Southern District of New York (Robert D. Drain, Judge), during which the Joint Chapter 11 Plan (the “Plan”) of Reorganization for Momentive Performance Materials Inc. (“MPM”) and its affiliated debtors (collectively with MPM, the “Debtors”) was confirmed.
The Debtors filed a Chapter 11 petition on April 13, 2014. After several months of negotiations, Judge Drain held a multi-day confirmation hearing and issued a bench decision on August 26, 2014, which was later corrected and modified in a bench decision on September 9, 2014. On September 11, 2014, Judge Drain issued a written order to effectuate the bench decisions. These appeals stem from the September 9, 2014, bench decision and the September 11, 2014, written order (the “Orders”).
Appellant U.S. Bank National Association (“U.S. Bank”) contends the Bankruptcy Court erred in confirming the Plan despite the Plan’s failure to provide any distributions to holders of subordinated notes (the “Subordinated Notes”) issued pursuant to an indenture agreement dated December 4, 2006 (the “2006 Indenture”).
Appellants BOKF, N.A., and Wilmington Trust, National Association, contend the Bankruptcy Court chose the wrong cramdown interest rate and erred in confirming the Plan despite the Plan’s failure to provide a “make-whole” payment to holders of senior lien notes issued pursuant to indentures dated May 25 and October 25, 2012 (the “2012 Indentures”).
For the following reasons, the Bankruptcy Court’s Orders are AFFIRMED.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 158(a).
BACKGROUND
MPM, together with its Debtor and non-Debtor subsidiaries (collectively, the “Company”), is one of the world’s largest producers of silicones and silicone derivatives, which are used in the manufacture of a myriad of industrial and household products. The Company began as the Advanced Materials business of General Electric Company (“GE”). In 2006, investment funds affiliated with Apollo Global Management, LLC (collectively, “Apollo”), acquired the Company from GE.
I. Facts Leading up to Bankruptcy
At the time Apollo acquired the Company, the Debtors issued substantial debt obligations, including the Subordinated Notes. The Subordinated Notes were issued pursuant to the 2006 Indenture,
all Indebtedness ... unless the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such obligations are subordinated in right of payment to any other Indebtedness of the Company[;] [the “Base Definition”] ... provided, however, that Senior Indebtedness shall not include, as applicable 4) any Indebtedness or obligation of the Company ... that by its terms is subordinate or junior in any respect to any other Indebtedness or obligation of the Company ... including any Pari Passu Indebtedness.
(Id., § 1.01).
In 2010, the Debtors issued springing second lien notes (the “Second Lien Notes”). The Second Lien Notes were unsecured when issued, but would become secured if all second lien notes issued in 2009 were redeemed. When the Second Lien Notes were issued, the Debtors stated that “[p]rior to and following the Springing Lien Trigger Date, the [Second Lien] Notes ... will be senior indebtedness” and rank “senior in right of payment to ... the Company’s existing subordinated notes.” (Debtors’ Subordinated Notes Ex. 3). In November 2012, the Second Lien Notes became secured by a junior lien — that is, the hen “sprung” — because all of the second hen notes issued in 2009 were redeemed.
In 2012, the Debtors issued two additional classes of senior secured notes — the 1.5 Lien Notes and the First Lien Notes (collectively, the “Senior Lien Notes”). The 1.5 Lien Notes were issued at an interest rate of 10% pursuant to an indenture dated May 25, 2012, and the First Lien Notes were issued at an interest rate of 8.875% pursuant to an indenture dated October 25, 2012.
In addition, the Senior Lien Notes provide for the payment of a “make-whole” premium if the Senior Lien Notes are redeemed before October 15, 2015:
[P]rior to October 15, 2015, the Issuer may redeem the [Senior Lien] Notes at its option, in whole at any time or in part from time to time ... at a redemption price equal to 100% of the principal amount of the [Senior Lien] Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the applicable redemption date.
(Senior Lien Appellants Ex. C1(A), ¶ 5).
However, the 2012 Indentures, which govern the Senior Lien Notes, contain an acceleration provision. The acceleration provision is triggered upon an “Event of Default,” which includes the voluntary commencement of a bankruptcy proceeding. (Senior Lien Appellants Ex. Cl, §§ 6.01(f), 6.02). If such an Event of Default is triggered, “the principal of, premi
The Senior Lien Notes, along with certain other debt (collectively, the “Senior Secured Loans”) are secured by the same collateral (the “Common Collateral”) as the Second Lien Notes. An intercreditor agreement (the “Intercreditor Agreement”) governs the relationship between the classes of notes. The Intercreditor Agreement provides that the Second Lien Notes are subordinated to the Senior Secured Loans with respect to their position in the Common Collateral. {See U.S. Bank Ex. F § 2). Moreover, the Intercreditor Agreement provides that it does not alter the Second Lien Noteholders’ rights as unsecured creditors. (Id. § 5.4).
II. The Plan
The Plan provides no distributions to the holders of the Subordinated Notes.
The Plan also provides that if the holders of the Senior Lien Notes vote in favor of the plan, all outstanding principal and accrued interest on the Senior Lien Notes would be paid in cash to the Senior Lien Noteholders on the effective date of the Plan. (U.S. Bank Ex. A §§ 5.4(a), (b)(i); 5.5(a), (b)(1)).
DISCUSSION
I. Legal Standard
The Court has jurisdiction to hear these appeals pursuant to 28 U.S.C. § 158(a). A district court reviews a bankruptcy court’s conclusions of law de novo and its findings of fact under a clearly erroneous standard. See In re Ames Dep’t Stores, Inc.,
II. Subordination Dispute
On behalf of the Subordinated Notehold-ers, U.S. Bank contends the Plan violates Section 1129(b) of the Bankruptcy Code, which requires that a plan must be “fair and equitable[ ] with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.” 11 U.S.C. § 1129(b)(1). “One of the attributes of a fair and equitable plan is that if an unsecured creditor is not paid in full, ‘the holder of any claim or interest that is junior to the claims of [the unsecured creditor] class will not receive or retain under the plan on account of such junior claim or interest any property.’ ” In re Coltex Loop Cent. Three Partners, L.P.,
The Subordinated Noteholders&emdash;unse-cured creditors who were not paid in full under the Plan&emdash;contend the Plan violates Section 1129(b) by denying them any recovery while providing distributions to the Second Lien Noteholders. Whether the Second Lien Noteholders are entitled to
The 2006 Indenture provides that the Subordinated Notes are “subordinated in right of payment ... to the prior payment in full of all existing and future Senior Indebtedness of the Company.” (U.S. Bank Ex. D, § 10.01). Senior Indebtedness is defined as:
all Indebtedness . •.. unless the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such obligations are subordinated in right of payment to any other Indebtedness of the Company!;] [the “Base Definition”] ... provided, however, that Senior Indebtedness shall not include, as applicable 4) any Indebtedness or obligation of the Company or any Restricted Subsidiary that by its terms is subordinate or junior in any respect to any other Indebtedness or obligation of the Company ... including any Pari Passu Indebtedness.
(Id., § 1.01).
U.S. Bank argues that according to the plain language of the Indenture, Senior Indebtedness cannot include debt that is “subordinated in right of payment” (the “in right of payment” clause) or “subordinate or junior in any respect” to any other debt (the “in any respect”, clause). Because the Second Lien Notes are secured by a junior lien, U.S. Bank argues they cannot be Senior Indebtedness under the “in any respect” clause. The Debtors argue, and the Bankruptcy Court held, that both clauses exclude payment subordination&emdash; rather than lien subordination&emdash;from the definition of Senior Indebtedness, and thus the Second Lien Notes are Senior Indebtedness.
The Court agrees with the Debtors and the Bankruptcy Court.
The “interpretation of Indenture provisions is a matter of basic contract law.” In re AMR Corp.,
“In a dispute over the meaning of a contract, the threshold question is whether the contract is ambiguous.” Lockheed Martin Corp. v. Retail Holdings, N.V.,
Before delving into the language of the 2006 Indenture, it is important to understand the difference between lien sub
Lien subordination involves two senior creditors with security interests in the same collateral, one of which has lien priority over the other. To the extent of any value derived from the collateral {e.g., its liquidation proceeds upon a sale), the senior lien lender is repaid first from collateral proceeds, and the junior lien lender collects only from any remaining collateral value. If the collateral proceeds are insufficient to repay the senior lender in full, then both the senior hen and junior lien lenders, and all other unsecured senior creditors, rank equally in their right to repayment of their remaining debt from the other assets or resources of the borrower. By contrast, in payment subordination, the senior lender enjoys the right to be paid first from all assets of the borrower or any applicable guarantor, whether or not constituting collateral security for the senior or subordinated lenders. Because payment subordination depends only on the amount owed and not on the value of any particular collateral, it is a more fundamental form of subordination and is generally more advantageous to a senior lender.
Robert L. Cunningham & Yair Y. Galil, Lien Subordination and Intercreditor Agreements, The Rev. of Banking & Fin. SERVICES, May 2009, at 49, 50.
An examination of the plain language of the definition of Senior Indebtedness reveals that only indebtedness subject to payment subordination, and not indebtedness subject to lien subordination, is excluded. The Base Definition of Senior Indebtedness excludes debt that is “subordinated in right of payment” to any other debt. The words “in right of payment” clearly refer only to payment subordination; thus, the Base Definition excludes only indebtedness subordinated by payment from the definition of Senior Indebtedness.
Six provisos follow the Base Definition. The fourth of those provisos — the “in any respect” clause — provides Senior Indebtedness cannot include debt that is “subordinate or junior in any respect” to other debt. U.S. Bank rests much of its argument on this clause, as upon first glance, it appears to be as broad as possible, thus encompassing both payment and lien subordination. However, closer consideration reveals this is not the case.
First, the six provisos appended to the Base Definition of Senior Indebtedness must be read in conjunction with the Base Definition. See, e.g., Adams v. Suozzi,
With that in mind, the “in any respect” clause unambiguously clarifies the Base Definition by ensuring the exclusion of indebtedness that is subordinated by payment to other indebtedness “by its terms,” even if the instrument creating the indebtedness does not expressly create that subordination. See In re MPM Silicones, LLC,
Second, as the Bankruptcy Court correctly noted, if the “in any respect” clause is read — as U.S. Bank contends it must be — to encompass both payment and lien subordination, it would entirely subsume the exclusion of indebtedness “subordinated in right of payment” contained in the Base Definition. Such a construction violates bedrock principles of contract interpretation. See Mastrobuono v. Shearson Lehman Hutton, Inc.,
U.S. Bank faults this interpretation of the “in any respect” clause, arguing it fails to give meaning to the words “in any respect.” U.S. Bank is wrong. The “in any respect” clause excludes from the definition of Senior Indebtedness “any Indebtedness or obligation of the Company ... that by its terms is subordinate or junior in any respect to any other Indebtedness.” (U.S. Bank Ex. D, § 1.01). “In any respect,” placed in context, makes clear that all types of payment subordination — no matter how that payment subordination is created — precludes an obligation from being Senior Indebtedness. It makes perfect sense that the drafters of the Indenture would have included the words “in any respect” when seeking to emphasize that all debt subordinated by right of payment through any non-explicit means is excluded from the definition of Senior Indebtedness.
U.S. Bank next argues this interpretation of Senior Indebtedness — just like the interpretation U.S. Bank proposes — also violates principles of contract construction
Thus, the plain language of the definition of Senior Indebtedness unambiguously provides that Senior Indebtedness excludes only debt subordinated by payment, and not debt secured by a junior lien. The “in any respect” clause augments the Base Definition, clarifying that the instrument creating the debt does not have to render that debt explicitly subordinated by right of payment to other debt; the debt is still excluded from the definition of Senior Indebtedness if it is “by its terms ... in any respect” subordinated by right of payment.
Other considerations also militate in favor of this interpretation. The 2006 Indenture contains an anti-layering provision, which precludes the Debtors from incurring debt that is “subordinate in right of payment” to any other debt issued by Debtors, unless it is “pari passu” with or “subordinate in right of payment” to the Subordinated Notes. (U.S. Bank Ex. D § 4.13). Nothing contained in the anti-layering covenant prevents the Debtors from issuing debt that is secured by a junior lien but ranks senior in right of payment to the Subordinated Notes. It makes little sense that the anti-layering covenant itself would not prohibit Debtors from issuing such layered debt, but a proviso within the definition of Senior Indebtedness would provide that very same prohibition.
Moreover, U.S. Bank concedes that if the lien securing the Second Lien Notes had never sprung, those Notes would constitute Senior Indebtedness. In U.S. Bank’s view, the Second Lien Notes were senior to the Subordinated Notes when they were unsecured, but became pari passu with the Subordinated Notes when the junior lien sprang. As the Bankruptcy Court correctly noted, this is an absurd result that should be avoided. See Inter-Digital Commc’ns Corp. v. Nokia Corp.,
Thus, the 2006 Indenture provides that Senior Indebtedness unambiguously excludes only debt subordinated by payment; it does not exclude debt secured by a junior lien.
U.S. Bank also contends the Second Lien Notes are subordinated by payment to the Senior Secured Loans by the Inter-creditor Agreement. The Court does not agree. The Intercreditor Agreement addresses only the relative priorities of the liens securing the Senior Secured Loans and the Second Lien Notes. (See U.S. Bank Ex. F § 2 (entitled “Lien Priorities”)). Further, the Intercreditor Agreement provides that it does not alter the Second Lien Noteholders’ rights as unsecured creditors. (Id. § 5.4).
Finally, U.S. Bank contends the “primary feature of the [Second Lien Note-holders’] subordination is the requirement that they must wait in line to have their debt paid as to a substantial portion of the Debtor’s assets,” that is, the Common Collateral. (U.S. Bank Mem. at 11). Thus, even in the provisions of the Intercreditor Agreement that U.S. Bank contends connote payment subordination, “[t]he focus still is on the collateral that was agreed to be secured by the liens.” In re MPM Silicones, LLC,
Because the Second Lien Notes are Senior Indebtedness, the Plan — which provides no distributions to the holders of the Subordinated Notes — does not run afoul of Section 1129(b)’s fair and equitable requirement.
III. The Cramdown Interest Rate Dispute
BOKF, as Trustee for the First Lien Noteholders, and Wilmington Trust, as Trustee for the 1.5 Lien Noteholders (collectively, the “Senior Lien Appellants”) also contend the Plan violates Section 1129(b)’s fair and equitable requirement. See 11 U.S.C. § 1129(b). To be “fair and equitable” to fully secured creditors such as the Senior Lien Appellants, a plan must allow the objecting class to “retain the liens” securing its claim and receive “de
The Senior Lien Appellants contend the Plan violates Section 1129(b) by using the “formula approach” to calculate the cram-down interest rate, and, in the alternative, by calculating the cramdown interest rate under the formula approach incorrectly.
A. Interest Rate Approach
Under the Plan, the Senior Lien Appellants will receive deferred cash payments; thus, they are entitled to interest payments “to ensure that, over time, [they] receive[ ] disbursements whose total present value equals or exceeds that of the allowed claim.” Till v. SCS Credit Corp.,
The Senior Lien Appellants contend the Court should determine the interest rate using an “efficient market” approach. Under the efficient market approach, the cramdown interest rate is based on the interest rate the market would pay on such a loan, in this case measured by “the rates on the exit and bridge financing the Debtors actually obtained.” (Senior Lien Appellants’ Mem. at 16). The Debtors contend the Court should use the formula approach laid out by the Supreme Court in Till v. SCS Credit Corp.,
The Court agrees with the Debtors and the Bankruptcy Court.
Although the Senior Lien Appellants correctly point out Till was decided in the context of a Chapter 13 bankruptcy — rather than a Chapter 11 bankruptcy — the Court finds much of Till’s reasoning applicable in the Chapter 11 context. In Till, the Supreme Court rejected the efficient market approach because it “imposes significant evidentiary costs, and aims to make each individual creditor whole rather than to ensure the debtor’s payments have the required present value.” Till v. SCS Credit Corp.,
The Second Circuit, in a pre-Till opinion also in the Chapter 13 context, signaled its agreement with this reasoning. In In re Valenti
The Court finds the Second Circuit’s reasoning in Valenti applicable in the Chapter 11 context. In fact, in Till, the Supreme Court explicitly stated: “We think it likely that Congress intended bankruptcy judges and trustees to follow essentially the same approach when choosing an appropriate interest rate” under any of the various provisions of the Bankruptcy Code requiring a court to “discount a stream of deferred payments back to their present dollar rate.” Till v. SCS Credit Corp.,
The Senior Lien Appellants attempt to distinguish Till and Valenti by pointing to a footnote in Till, which states that “when picking a cramdown rate in a Chapter 11 case, it might make sense to ask what rate an efficient market would produce.” Till v. SCS Credit Corp.,
The Senior Lien Appellants also point to precedent from other Circuits, such as the Sixth Circuit in In re American HomePatient,
The Senior Lien Appellants ask the Court to require the Bankruptcy Court to choose a cramdown interest rate that would put them in the same position they would have been in had they arranged a new loan. This is contrary to both Till and Valenti and, thus, the Court declines to do so.
B. Interest Rate Calculation
The Senior Lien Appellants next contend the Bankruptcy Court erred in applying the formula approach because it chose to use the 7-year Treasury rate, rather than the national prime rate used by the Supreme Court in Till, as the base risk-free rate. Judge Drain chose the Treasury rate because it is “often used as a base rate for longer-term corporate debt such as the [Replacement [N]otes.” In re MPM Silicones, LLC,
Similarly, the risk premiums chosen by Judge Drain for both the First Lien Notes and the 1.5 Lien Notes are well within the bounds of reasonableness. The Senior Lien Appellants correctly point out that neither Till nor Valenti requires a risk premium of 1 to 3%. However, Judge
IV. The Make-Whole Dispute
The Senior Lien Appellants additionally contend the Bankruptcy Court erred in failing to award them a “make-whole” premium. Whether the Senior Lien Appellants are owed a make-whole premium turns on language in both the 2012 Indentures and the Senior Lien Notes themselves. The Senior Lien Notes provide for the payment of a make-whole premium if the Senior Lien Notes are redeemed before October 15, 2015. However, the 2012 Indentures, which govern the Senior Lien Notes, contain an acceleration clause triggered by the voluntary commencement of a bankruptcy proceeding. (Senior Lien Appellants Ex. Cl, §§ 6.01(f), 6.02). The acceleration clause provides that in the event of a bankruptcy proceeding, “the principal of, premium, if any, and interest on all the [Senior Lien] Notes shall ipso facto become and be immediately due and payable.” (Id., § 6.02).
The Senior Lien Appellants contend the Debtors’ commencement of the Chapter 11 proceeding constituted a redemption of the Senior Lien Notes prior to October 15, 2015, such that the Senior Lien Notehold-ers are entitled to a make-whole payment. The Debtors contend that the acceleration provision was triggered when they filed for bankruptcy, negating the Senior Lien Appellants’ right to a make-whole premium.
The Court agrees with the Debtors and the Bankruptcy Court that the Senior Lien Appellants are not entitled to a make-whole premium. As described above, the “[ijnterpretation of Indenture provisions is a matter of basic contract law.” In re AMR Corp.,
Section 6.01(f) of the 2012 Indentures provides that the commencement of a Chapter 11 proceeding is an Event of Default. See 2012 Indentures § 6.01(f) (“An ‘Event of Default’ occurs if ... the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law commences a voluntary' case.”). Further, a Section 601(f) Event of Default triggers the acceleration clause contained in Section 6.02 of the 2012 Indentures. That acceleration clause provides:
If an Event of Default (other than an Event of Default specified in Section 601(f) ...) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding [Senior Lien] Notes, by notice to the Company may declare the principal of, premium, if any, and accrued but unpaid interest on all the [Senior Lien] Notes to be due and payable.... If an Event of Default specified in Section 6.01(f) ... occurs, the principal of, premium, if any, and interest on all the [Senior Lien] Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in principal amount of outstanding [Senior Lien] Notes by notice to the Trustee may rescind any such acceleration with respect to the Notes and its consequences.
Having determined the filing of the bankruptcy case triggered an automatic acceleration of the Senior Lien debt, the Court must determine whether a make-whole payment is due to the Senior Lien Noteholders under such circumstances. Under New York law, “[generally, a lender forfeits the right to a prepayment consideration by accelerating the balance of the loan. The rationale most commonly cited for this rule is that acceleration of the debt advances the maturity date of the loan, and any subsequent payment by definition cannot be a prepayment,” U.S. Bank Nat’l Ass’n v. S. Side House, LLC,
Two separate clauses of the agreements potentially provide for a make-whole provision in the context of an acceleration of debt first, the acceleration clause, and second, the make-whole provision itself.
The acceleration clause does not clearly and unambiguously call for the payment of the make-whole premium in the event of an acceleration of debt. To the contrary, the acceleration clause provides the “premium, if any” shall become immediately payable upon the triggering of the acceleration clause. (2012 Indentures § 6.02). This language is not sufficient to create an unambiguous right to a make-whole payment. Courts allowing make-whole payments under these circumstances have largely required the contract to provide explicitly for a make-whole premium in the event of an acceleration of debt or a default. See, e.g., U.S. Bank Nat’l Ass’n v. S. Side House, LLC,
Neither does the make-whole provision contained in paragraph 5 of the Senior Lien Notes clearly and unambiguously call for the payment of the make-whole premium upon acceleration of debt. The Senior Lien Appellants contend that, under the make-whole provision, regardless of whether the voluntary commencement of the bankruptcy case was an Event of Default triggering a mandatory acceleration of the debt, the early payment of the debt constituted a redemption prior to October 15, 2015.
However, under New York law, the payment of debt pursuant to an acceleration clause does not constitute an early redemption. Instead, the automatic acceleration of the debt under Section 6.02 of the 2012 Indentures “changed the date of maturity from some point in the future ... to an earlier date based on the debtor’s default under the contract.” In re AMR Corp.,
Next, the Senior Lien Appellants argue the make-whole provision satisfies the explicitness requirement because it contains a date certain — October 15, 2015 — before which redemption triggers the make-whole payment. They contrast this with a hypothetical provision that would condition the triggering of a make-whole payment upon redemption before maturity, and cite In re Chemtura Corp.,
The Senior Lien Appellants contend such a result “makes no commercial sense, contrary to the tenet of New York contract law that courts should avoid interpretations that would be absurd, commercially unreasonable, or contrary to the reasonable expectations of the parties.” (Senior Lien Appellants Mem. at 26 (internal quotation marks omitted)). However, this result is exactly what the Senior Lien Appellants bargained for under the 2012 Indentures. The Senior Lien- Appellants agreed to accelerate the debt owed to them in the event of a default, establishing they “ ‘preferred, sensibly no doubt, accelerated payment over the ‘opportunity’ to earn interest from the ... loan over a period of years.’ ” U.S. Bank Nat’l Ass’n v. S. Side House, LLC,
Neither the 2012 Indentures nor the Senior Lien Notes themselves clearly and unambiguously provide that the Senior Lien Noteholders are entitled to a make-whole payment in the event of an acceleration of debt caused by the voluntary commencement of a bankruptcy case. Thus, the Bankruptcy Court correctly held that the Senior Lien Noteholders are not entitled to a make-whole payment.
CONCLUSION
The Bankruptcy Court’s Orders of September 9 and September 11, 2014, are AFFIRMED.
The Clerk is instructed to terminate as moot the Debtors’ motions to dismiss the appeals. (Doc. # 11 in 14-cv-7471, Doc. # 11 in 14-cv-7472, and Doc. # 18 in 14-cv-7492).
The Clerk is further instructed to terminate the pending appeals and close these cases.
SO ORDERED.
Notes
. U.S. Bank is the Indenture Trustee for the Subordinated Noteholders under the 2006 Indenture.
. BOKF is the Indenture Trustee for the First Lien Noteholders, and Wilmington Trust is the Indenture Trustee for the 1.5 Lien Note-holders.
. The indentures and notes governing the First Lien Notes and 1.5 Lien Notes are identical in all parts relevant to the disputes at issue in this case. The Senior Lien Notes are attached as Exhibit A to each of the 2012 Indentures.
. To ensure the Debtors would have been prepared to cash-out the holders of the Senior Lien Notes had they voted to approve the Plan, the Debtors obtained financing that would have allowed them to do so.
. This interpretation is strengthened by the reference to “Indebtedness” at the start of the "in any respect” clause. As the Bankruptcy Court correctly noted, “the parties distinguished liens, which secure indebtedness, from indebtedness itself in several instances in the indenture, including in the definition of ‘Indebtedness’ and 'Lien.' ” In re MPM Silicones, LLC,
. U.S. Bank relies upon an article published by Fitch Ratings in February 2006 to support its contention that the "in any respect” clause excludes debt secured by a junior lien from the definition of Senior Indebtedness. The article noted that, at the time, most anti-layering covenants did not preclude issuers from layering senior debt secured by a junior lien. (U.S. Bank Ex. L at 4-5). The article suggested that parties employ the phrase "subordinated in any respect" in anti-layering covenants should they wish to preclude the layering of such debt. However, that is not what the parties here did. Had the parties intended to follow this advice, logic dictates they would have done so in the anti-layering covenant itself — as the article suggests — rather than in a proviso to the, definition of Senior Indebtedness. Moreover, there is no evidence in the record that the parties relied on the Fitch Ratings article, or any other source cited by U.S. Bank, when drafting the 2006 Indenture. And, as Judge Drain correctly • pointed out, these sources date from just a few months before the issuance of the Subordinated Notes; thus, "there was no well established standard form that might add a meaningful context to the [2006 Indenture's plain terms and internal consistency.” In re MPM Silicones, LLC,
. Even though the language of the Indenture is unambiguous, if the Court were to find the definition of “Senior Indebtedness” lacked definite and precise meaning, the extrinsic evidence in the record demonstrates the parties believed the Second Lien Notes were Senior Indebtedness. The Debtors stated in multiple filings with the Securities and Exchange Commission — both at the time of the issuance of the Second Lien Notes and thereafter — that the Second Lien Notes were Senior Indebtedness; no Subordinated Noteholder — nor U.S. Bank — objected to this characterization. This evidence demonstrates the parties considered the Second Lien Notes to be Senior Indebtedness, and further supports the Court's ruling.
. Nor does the Plan violate the absolute priority rule by preserving certain intercompany interests without paying the Subordinated Noteholders in full. The "technical preservation of equity is a means to preserve the corporate structure that does not have any economic substance and that does not enable any junior creditor or interest holder to retain or recover any value under the Plan. The Plan’s retention of intercompany equity interests for holding company purposes constitutes a device utilized to allow the Debtors to maintain their organizational structure and avoid the unnecessary cost of having to reconstitute that structure.” In re Ion Media Networks, Inc.,
. The Court is aware other bankruptcy and district courts in this Circuit have followed the American HomePatient approach, concluding that when an efficient market exists for comparable financing, that rate should be considered when determining the appropriate cramdown interest rate. However, these cases do not mandate that a bankruptcy court choose the efficient market rate; they simply hold courts should consider whether an efficient market rate exists before determining the cramdown interest rate. See, e.g., In re 20 Bayard Views, LLC,
. In fact, Judge Drain added an additional amount "to the risk premium in light of the fact that the [DJebtors used Treasury rates [rather than the prime rate] as the base rate.” In re MPM Silicones, LLC,
. The Senior Lien Appellants contend “prepayment” is different than "redemption” because a redemption is not limited to payments before maturity but "refers simply to the payment of notes, without regard to maturity.” (Senior Lien Appellants Mem. at 33). However, the provisions at issue in In re AMR Corp. also provided for a make-whole premium if the debt was "redeem[edl” early, see In re AMR Corp.,
To be sure, the provisions at issue in In re AMR Corp. are different from those at issue here in one important respect there, the make-whole provision signals that the acceleration clause controls when it applies. In re AMR Corp.,
. It matters not that the Senior Lien Note-holders’ right to rescind the acceleration of the debt was canceled by the application of the automatic stay pursuant to Section 362 of the Bankruptcy Code. The Debtors correctly point out that all contracts signed among the parties operate against the backdrop of the relevant Bankruptcy Code provisions. The potential for an automatic stay upon the filing of a bankruptcy case is a part of the bargain to which the parties agreed.
. Neither are the Senior Lien Noteholders entitled to damages in the amount of the make-whole premium under the perfect tender rule. First, the existence of the make-whole provision modified the perfect tender rule such that the common law remedy is unavailable. See, e.g., U.S. Bank Nat. Ass’n v. S. Side House, LLC,
.The Debtors have moved to dismiss these appeals as equitably moot. However, the motions to dismiss the appeals as equitably moot are themselves mooted by this Court's decision to affirm the Orders of the Bankruptcy Court. See In re Metromedia Fiber Network, Inc.,