Leveraging Secured Lender Bankruptcy Cramdown Rules and Related Valuation Issues

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, July 8, 2020

Recorded event now available

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Program Materials

This CLE webinar will discuss the rules for cramdown under Chapter 11 for debtors that are not proceeding under the Small Business Reorganization Act of 2019, the best strategies and practices for debtors and creditors when confirmation will involve cramdown, and current arguments for resolving valuation disputes, determining present value, satisfying the ”formula approach” and other approaches adopted by various courts, and setting appropriate cramdown interest rates.

Description

Cramdown occurs when a plan is confirmed without the consent of a dissenting class of creditors. The Bankruptcy Code requires debtors to satisfy certain requirements to obtain confirmation when a class of creditors dissents. This CLE will address the statutory framework that applies, and must be addressed, in connection with a plan of reorganization.

Concerning secured lenders, debtors may seek to provide deferred cash payments equal to the present value of the secured claim (i.e., the collateral securing repayment of the debt), a sale of collateral subject to a security agreement or nonconsensual lien, or otherwise provide the lender with the indubitable equivalent of its claim. This CLE will further address considerations when a debtor attempts to extend the maturity of debt, effectively providing it with modified obligations that will generate more free cash flow.

Because the value of the claim is paid out over time, the rate of interest that the secured creditor must receive to ensure the payments equal the amount of the claim is a critical component of the plan. While many courts have applied the Till "prime-plus" formula, uniformity among all jurisdictions has proved elusive. The Second Circuit, in Materials Inc. v. BOKF, NA (In re MPM Silicones L.L.C.), 2017 BL 376794 (2d Cir. Oct. 27, 2017), required notes to bear market rate if an "efficient market" exists.

Listen as our authoritative panel of bankruptcy attorneys discusses the mechanisms establishing the proper cramdown interest rate for secured lenders and other debt instruments, practical strategies for secured lenders to defeat the cramdown plan, and how to argue the appropriate cramdown interest rate.

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Outline

  1. Cramdown requirements
    1. Section 1129 (b)(2)(A) requirements
    2. Case law developments
  2. Valuation issues
  3. Cramdown interest rate post-Till
    1. Efficient market vs. prime plus
    2. MPM Silicones (Momentive) and other case law developments

Benefits

The panel will review these and other key issues:

  • What factors will the bankruptcy court consider in determining whether a secured lender has received the value of its secured claim in a cramdown situation?
  • What are the requirements when the debtor disposes of the collateral through a bankruptcy sale?
  • What impact does the cramdown interest rate play in determining the feasibility of the debtor’s plan of reorganization?

Faculty

Anthony, David M.
David M. Anthony

Member
Bone McAllester Norton

Mr. Anthony represents banks, businesses, and individuals in the areas of commercial litigation, creditors’...  |  Read More

Dunham, Griffin
Griffin S. Dunham

Member
Dunham Hildebrand

Mr. Dunham concentrates his practice in the areas of Chapter 11 bankruptcy reorganizations, insolvency and distressed...  |  Read More

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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

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