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that argument, because the cooperative had discretion to redeem the certificates at face value.
From the debtor's standpoint the most useful application of the "indubitable equivalent" alternative is to shift the secured claim to other collateral. Thus in Sun Country,344 the Fifth Circuit held that shifting the security for a debt from a mortgage on a single 200 acre parcel to a security interest in 21 notes from lot purchasers secured by liens on 21 separate parcels constituted "indubitable equivalent." While the approach is certainly theoretically correct, the sparse opinion does not reveal why the bankruptcy court apparently relied on the face value of the notes and rejected the secured creditor's argument that their present value was determined by what they could be sold for, which was only 30-50% of their face value due to their poor payment history. Subsequent opinions pointed out how the subsequent history of those notes demonstrates the problem with valuing those notes at face value, as the Sun Country trial court apparently did.345 The Fifth Circuit did not rule that notes should be valued at face value, but merely affirmed the bankruptcy court's conclusion as supported by sufficient evidence.346 This highlights the need for both creditors and debtors to be prepared to put on substantial evidence of the value of alternative collateral and a comparison of the risks imposed on the creditor.347
Another type of shift of collateral is converting apartments to condominiums; one court found this too risky to provide indubitable equivalent.348 The Ninth Circuit BAP rejected a "cows for cash" indubitable equivalence argument, even though the creditor had originally been secured by cows, where the cows would be used in a startup operation in a different part of the country.349 A less controversial modification is simply to change some of
344
In re Sun Country Development, 764 F.2d 406 (5th Cir. 1985).
345
In re Walat Farms, Inc., 70 B.R. 330, 336 n.7 (Bankr. E.D. Mich. 1987)("According to the parties' counsel, the debtor [Sun Country] has still, more than 3 years since confirmation, not put in the roads; nine of the 21 trust deeds have had to be separately foreclosed and the value of the property now is significantly less than the amount 'determined' by the court.").
346 764 F.2d at 409.
347
The Southern District of Texas affirmed confirmation of a plan that proposed to pay a claim secured by a real property lien by a distribution of stock marketable on the London International Stock Exchange. In re San Felipe & Voss, Ltd., 115 B.R. 526 (S.D. Tex. 1990). In an extensively reasoned opinion, the court rejected arguments that "indubitable equivalence" requires "strict cash equivalence."
348 In re Sparks, 171 B.R. 860 (Bankr. N.D. Ill. 1994).
349 In re Wiersma, 324 B.R. 92, 112 (9th Cir. BAP 2005).
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