GPIF Aspen Club LLC v. The Aspen Club & Spa, LLC

In a SARE case, the BAP says that the bankruptcy court cannot deny a lift-stay motion without finding that confirmation is reasonably possible in a reasonable time.

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Case Type:
Case Status:
Reversed and Remanded
BAP No. CO-19-043 (10th Circuit, Jul 24,2020) Not Published
Before denying a secured creditor's motion for relief from stay in a single asset real estate case based on the creditor's argument that the debtors' plan is unconfirmable, the bankruptcy court needs to make findings of fact and conclusions of law on the issue of whether there is a reasonable possibility that the plan provides the prepetition secured creditor with the indubitable equivalent of its claim such that the plan has a reasonable possibility of confirmation within a reasonable time.
Procedural context:
The Bankruptcy Court denied a secured creditor's motion for relief from stay that was based on the argument that the debtors' chapter 11 plan was unconfirmable. The secured creditor appealed.
Aspen Club & Spa, LLC and Aspen Redevelopment Company, LLC3 (together or individually, “Aspen Club”) filed separate chapter 11 cases on May 16, 2019, which were jointly administered. Aspen Club owns real property in downtown Aspen, Colorado. Aspen Club is developing luxury residential three- and four-bedroom condominiums, employee housing units, and a 60,800 square foot fitness club and spa (the “Property”). It took Aspen Club eight years and $5 million to obtain all approvals and licenses from local authorities to begin construction of the development project on the Property. Aspen Club acquired ownership of the Property after consolidating $41 million of secured debt. Construction began in 2015 with over $18 million in presales and an expected completion date in 2018. Aspen Club relied on several prepetition creditors to finance the construction and development of the Property. FirstBank agreed to provide $45 million in construction financing. By summer 2017, FirstBank had disbursed about $30 million but refused to lend the additional $15 million. The appellant, GPIF Aspen Club LLC, acquired Firstbank's interest in the $30MM mortgage loan. The bankruptcy court determined that Aspen Club was subject to the single asset real estate provisions of the Bankruptcy Code. Aspen Club obtained $4.2MM in debtor-in-possession financing from EFO Financial Group, LLC, and granted EFO a priming lien under § 364(c)(1) on the property securing GPIF's claim. Besides EFO's priming lien, Aspen Club had failed to pay creditors entitled to creditors entitled to statutory "mechanics' liens" totaling about $25.4MM. Under state law. these liens were senior in priority to GPIF's mortgage loan lien. Aspen Club filed a chapter 11 that called for exit financing with a lien senior to the liens of all pre-petition liens other than the mechanics' liens, which will be paid from the exit financing loan facility. GPIF filed a motion for relief from stay, arguing that Aspen Club's chapter 11 plan was unconfirmable under § 362(d)(3), because it relies on non-consensual priming lien exit financing, which the Bankruptcy Court cannot approve; under § 1129(b)(2)(a)(i), because GPIF would not retain its lien under the plan; and under § 1129(b)(2)(a)(iii), because GPIF would not realize the indubitable equivalent of its secured claim because of the proposed exit financing. The bankruptcy court denied GPIF's motion for relief from stay.
MICHAEL, SOMERS, and JACOBVITZ, Bankruptcy Judges

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