ALI-ABA Course of Study Commercial Real Estate Defaults, Workouts & Reorganizations. April 20-22, 2006 Hilton Head Island, South Carolina

Transcription

1 863 ALI-ABA Course of Study Commercial Real Estate Defaults, Workouts & Reorganizations April 20-22, 2006 Hilton Head Island, South Carolina Disclosure Statements: Confirmation and Cramdown of Chapter 11 Plans By Barbara J. Houser Douglas Wade Carvell Holly D.F. Meister U.S. Bankruptcy Court Dallas, Texas

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3 865 TABLE OF CONTENTS I. INTRODUCTION II. DISCLOSURE STATEMENT A. DISCLOSURE STATEMENT CONTENTS B. OBJECTIONS TO THE DISCLOSURE STATEMENT C. SOLICITATION OF ACCEPTANCES AND REJECTIONS D. RESERVATION OF FUTURE AVOIDANCE LITIGATION III. GOOD FAITH A. IN GENERAL B. THE RELEVANCE OF PREPETITION CONDUCT C. OTHER FACTORS IV. FEASIBILITY A. IN GENERAL B. FACTORS TO CONSIDER IN CHALLENGING FEASIBILITY DEBTOR S PRIOR PERFORMANCE ADEQUACY OF CAPITAL STRUCTURE/AVAILABILITY OF CREDIT/FUTURE MERGERS EARNING POWER OF THE DEBTOR S BUSINESS ECONOMIC CONDITIONS ABILITY OF MANAGEMENT AND PROBABILITY OF CONTINUANCE OF SAME MANAGEMENT RELATED MATTERS THAT AFFECT AN ABILITY TO PERFORM THE PLAN. 18 V. CRAMDOWN UNDER SECTION 1129(b) A. IN GENERAL B. THE PLAN MUST NOT DISCRIMINATE UNFAIRLY WITH RESPECT TO EACH DISSENTING CLASS OF CLAIMS OR INTERESTS C. THE PLAN MUST BE FAIR AND EQUITABLE WITH RESPECT TO EACH DISSENTING CLASS OF CLAIMS OR INTERESTS FAIR AND EQUITABLE TREATMENT OF A CLASS OF SECURED CLAIMS a. RETENTION OF LIENS AND CASH PAYMENTS (1) RISKLESS RATE PLUS PREMIUM (2) THE CONTRACT RATE (3) THE FORCED LOAN RATE (4) TILL S POTENTIAL RESOLUTION OF THE DEBATE b. SALE OF PROPERTY WITH LIEN TO ATTACH TO PROCEEDS c. INDUBITABLE EQUIVALENT FAIR AND EQUITABLE TREATMENT OF UNSECURED CLAIMS a. PAYMENT IN FULL (1) POST-PETITION INTEREST AND THE SOLVENT DEBTOR.. 29 i

4 866 b. ABSOLUTE PRIORITY (1) THE SUPREME COURT S OPINION IN 203 N. LASALLE (2) CONCLUSIONS FROM 203 N. LASALLE (3) POST-LASALLE CASES (a) STANDING TO MAKE THE LASALLE OBJECTION.. 36 (b) STRAWMAN AND INSIDER TRANSACTIONS (c) NEW VALUE PLAN: CAUSE TO TERMINATE EXCLUSIVITY? (d) SITUATIONS IN WHICH LASALLE DOES NOT APPLY VI. LEGISLATIVE UPDATE VII. CONCLUSION ii

5 867 TABLE OF CASES Acequia v. Clinton (In re Acequia), 787 F.2d 1352 (9 th Cir. 1986) , 16 Aetna Realty Investors, Inc. v. Monarch Beach Venture, Ltd. (In re Monarch Beach Venture, Ltd.), 166 B.R. 428 (C.D. Cal. 1993) American Network Leasing, Inc. v. Apex Pharm., Inc. (In re Apex Pharm., Inc.), 203 B.R. 432 (N.D. Ind. 1996) Bank of Am. Nat'l. Trust & Sav. Ass n. v. 203 N. LaSalle St. P ship, 526 U.S. 434 (1999) , 36, 37, 38, 39 Beal Bank S.S.B. v. Waters Edge Ltd. P ship, 248 B.R. 668 (D. Mass. 2000) , 27, Beal Bank, S.S.B. v. Way Apts., D.T. (In re Way Apts., D.T.), 201 B.R. 444 (N.D. Tex. 1996) , 32 Berkeley Fed. Bank & Trust v. Sea Garden Motel & Apts. (In re Sea Garden Motel & Apts.), 195 B.R. 294 (D.N.J. 1996) Canal Place Ltd. P ship v. Aetna Life Ins. Co. (In re Canal Place Ltd. P ship), 921 F.2d 569 (5 th Cir. 1991) , 14 Case v. Los Angeles Lumber Products Co., 308 U.S. 106, 121 (1939) Century Glove v. First. Am. Bank of New York, 860 F.2d 94 (3 rd Cir. 1988) Clarkson v. Cooke Sales & Serv. Co. (In re Clarkson), 767 F.2d 417 (8 th Cir. 1985) Colorado Mountain Express, Inc. v. Aspen Limousine Serv., Inc. (In re Aspen Limousine Serv., Inc.), 198 B.R. 341 (D. Colo. 1996) , 4 Computer Task Group, Inc. v. Brotby (In re Brotby), 303 B.R. 177 (9 th Cir. BAP 2003) Confederation Life Ins. Co. v. Beau Rivage, Ltd., 126 B.R. 632 (N.D. Ga. 1991) Consolidated Rock Prods. Co. v. DuBois, 312 U.S. 510, (1941) Corestates Bank, N.A. v. United Chemical Tech., Inc., 202 B.R. 33 (E.D. Pa. 1996) Creekstone Assocs. L.P. v. Resolution Trust Corp. (In re Creekstone Assocs. iii