- In re SW Boston Hotel Venture, LLC, et al., BAP No. MB 11-087 (October 1, 2012 1st Cir. BAP)
- The order confirming the substantially consummated plan of reorganization was vacated and the case remanded to the bankruptcy court to allow for the amendment of the plan to address Prudential’s increased claim and/or to provide alternative forms of relief to Prudential that would not unravel the reorganization.
- Procedural context:
- Appeal from the United States Bankruptcy Court for the District of Massachusetts of an order confirming a plan of reorganization and overruling Prudential’s objection to confirmation of the plan. Prudential’s requests for stay pending appeal were denied and the plan was substantially consummated.
- Prudential held a first priority lien in substantially all of the Debtors’ assets, with the City of Boston holding a second priority lien in the same assets. Prudential and the City of Boston were parties to an intercreditor agreement subordinating the city’s rights and granting Prudential the city’s voting rights. The Debtors filed a plan that proposed payment in full over time of Prudential’s secured claim, which it determined was approximately $52 million, plus postpetition interest. The bankruptcy court had determined that Prudential had not established that it was oversecured prior to the date of the sale of a hotel asset and used such date as the beginning date for the accrual of postpetition interest. The bankruptcy court utilized the “formula approach” in Till v. SCS Credit Corp., 541 U.S. 465 (2004) and set the interest rate for the cramdown loan at 4.25%. Prudential was the sole objector to the plan and the only party to vote in opposition to the plan. The bankruptcy court found that the treatment of Prudential’s claim was fair and equitable under §1129 and did not unfairly discriminate. The bankruptcy court also found that Prudential received the “indubitable equivalent” of its claim. Accordingly, the bankruptcy court confirmed the plan. Prudential appealed and sought a stay pending appeal from both the bankruptcy court and the BAP. The requests for stay were denied and the plan was substantially consummated. The BAP entered an order on the same date as this decision, affirming in part and reversing in part the decision fixing the amount of Prudential’s claim and determining the date on which Prudential had demonstrated it was oversecured. In such decision, the BAP held that the bankruptcy court hearing indicated that Prudential was oversecured as of the petition date, that the bankruptcy court erred in not allowing interest at a compounded rate, but the bankruptcy court did not err in awarding interest at the default rate in the loan agreement. The BAP determined that the amount of Prudential’s claim was integral to the confirmation decision and thus vacated the confirmation order and remanded to allow the Debtors to amend the plan to provide for Prudential’s increased claim and/or to allow for the court to provide alternative forms of relief that would not unravel the reorganization.
- Haines, Deasy, and Tester
3616 in the system
1 Being Processed