River Road Hotel Partners, LLC v. Amalgamated Bank

River Road Hotel Partners, LLC v. Amalgamated Bank, ---F.3d ---, Nos.10-3597 & 10-3598 (7th Cir. June 28, 2011)
On the substantive issue, and creating a split with the Third Circuit and the Fifth Circuit, the Court held that Code section 1129(b)(2)(A) does not permit debtors to use the so-called "cram down" process to confirm a Chapter 11 plan that sells pledged assets free and clear unless secured creditors can credit bid at sale. Referencing Judge Ambro's dissent in the Third Circuit's decision in Philadelphia Newspapers, the Court found that the plain language of Code section 1129(b)(2)(A)(iii) does not clearly state that a court can confirm sale plans absent credit bidding as described in Code sections 1129(b)(2)(A)(ii) and 363(k). The Court further found that, under the statutory canon that disfavors reading a statute in such a way that any portion of it would be superfluous, Code section 1129(b)(2)(A)(i) sets standards for cases where the debtor retains an asset or sells an asset that remains subject to lien and Code section 1129(b)(2)(A)(ii) sets standards for cases with free and clear asset sales. As a result, Code section 1129(b)(2)(A)(iii) only applies in cases where a debtor disposes of assets in a fashion different than the ones described in the other subsections of the statute. The Court concluded its ruling by finding that allowing the debtors to sell assets free and clear without permitting credit bidding by the secured lenders would contravene other sections of the Code. On the jurisdictional issue, the Court held that the expiration of certain deadlines contained in the original asset purchase agreements did not moot the appeal at bar. The Court found that the filing of amended asset purchase agreements that remained valid as of the appeal date resolved the factual aspect of this issue. The Court further found that the issue before it comprised one capable of repetition, yet evading review and, as a result, the Court concluded that the appeal remained viable.
Procedural context:
Consolidated direct appeals from orders of the Bankruptcy Court for the Northern District of Illinois denying bid procedures motions of debtors in coordinate Chapter 11 cases.
Chapter 11 debtors in multiple cases each filed proposed liquidation plans and coordinate bid procedures motions. In each case, the stalking horse bidder proposed to purchase substantially all of each debtor's assets for well below the balances due the applicable lenders. The lenders objected to the procedures motions on grounds that they did not comport with Code section 1129(b)(2)(A)(ii) because they proposed free and clear asset sales where the lenders would not be allowed to credit bid their debt. In response, the debtors argued that, regardless of the lack of credit bidding rights for the secured lenders, their plans and motions satisfied Code section 1129(b)(2)(A)(iii) by providing the lenders the indubitable equivalent of their claims.
Cudahy, Manion, Hamilton

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!

About us in numbers

3525 in the system

3408 Summarized

7 Being Processed