Leveraging Secured Lender Bankruptcy Cramdown Rules and Setting Interest Rates: Debtor and Lender Strategies

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


Conducted on Wednesday, July 15, 2015

Recorded event now available

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Program Materials

This CLE webinar will discuss secured lender cramdown plan requirements, strategies for secured lenders to defeat the cramdown plan, and the current arguments for setting appropriate cramdown interest rates.

Description

Cramdown reorganization plans, where secured debt is restructured without the lender’s consent, present opportunities for restructuring existing debt in bankruptcy. These strategies can provide strategic advantages for the debtor and require effective defense from lenders.

Debtors seek to provide secured creditors with deferred cash payments equal to the outstanding debt or otherwise provide the lender with the indubitable equivalent of its claim. Alternatively, the debtor may extend the maturity of debt, effectively providing it with additional working capital. 

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, there is not uniformity among courts. However, the New York Bankruptcy Court recently adopted the Till formula approach in the MPM Silicones (Momentive Performance) case somewhat eroding the “efficient market” theory.

Listen as our authoritative panel of bankruptcy attorneys discusses the mechanisms for secured creditor cramdown plans, effective 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 indubitable equivalent of its collateral in a cramdown situation?
  • What are the requirements if the debtor disposes of the collateral through a bankruptcy sale?
  • What impact does the cramdown interest rate play in determining the value of the lender’s claim?

Faculty

Gary L. Kaplan
Gary L. Kaplan

Partner
Fried Frank

Mr. Kaplan has extensive experience in representing debtors and official and unofficial creditors' and equity...  |  Read More

Benjamin Mintz
Benjamin Mintz

Partner
Kaye Scholer

Mr. Mintz’s practice is focused on representations of corporate and individual debtors in and out of...  |  Read More

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