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How important is it, in a Chapter 11 cramdown plan, for a=
Plan must be fair and equitable under 1129(b). It is unlikely that the court will find the plan fair and equitable if the unsecured class doesn't accept the plan and estate funds are being diverted to save a negative cash flow property that isn't otherwiseproviding value to the plan.there is a good reason why the debtor insists on keeping such a property such as reasonable investment in rehabilitation of the propertywill ultimately result in positive cash flow or net proceeds from sale that will fund the plan.
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To: NACBA BK ; CDCBAA Listserv ; Chapter 11 Issues ; CAMFFG
Sent: Friday, March 8, 2013 9:20 AM
Subject: [cdcbaa] How important is it, in a Chapter 11 cramdown plan, for an investment property to break even?
Listmates,
It is my understanding that
in a Chapter 11 case with a cramdown, the property being crammed down should
generate positive cash flow.
As far as I understand, the
rationale is that if the property generates a loss and requires an ongoing
investment, money is being siphoned out of the estate without any benefit to
the unsecured creditors who are taking a haircut. To put it differently,
if the unsecured creditors are taking a loss, debtor should devote all
disposable income to paying them and should not be allowed to invest in ways
that will not benefit them.
1. In your
experience, in a Chapter 11 case with a cramdown plan, how important is it for
an investment property being crammed down to break even? What kind of
loss might be considered acceptable as de minimis?
2.As with other
things, the answer might depend on the judge. Do you have any experiences
with specific judges in CD Cal. that reveal the judges position on this issue?
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