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lender objected to the debtor's plan on various grounds. The court found that the plan was not feasible because, among others, its expert's testimony lacked data supporting that the debtor would be able to refinance at the end of the plan term to pay a balloon payment to the objecting secured lender. Also, based on expert testimony and the methodology used, the court found that the secured creditor's proposed interest rate of 8.6% adequately captured the risks that the secured creditor faced under the plan. The court also found the debtor's disclosures lacking because the disclosure statement did not provide the financial information of the proposed tenant of the real property collateral and did not provide sufficient information about the reorganized debtor's management structure. Additionally, the court found the new equity holders of the reorganized debtor were indirect owners and insiders of the debtor. Thus, the court concluded that the plan needed to provide competitive bidding for the new equity. The court then turned to a clause in the plan that prevented the secured creditor from going after the guarantors of its loan. The court found the clause to be too broad because it affected causes of action not connected to the bankruptcy. In addition to denying confirmation of the debtor's plan, the court granted the secured creditor stay relief because the debtor failed to prove "a reasonable possibility of executing a successful reorganization," as the debtor's case had been pending for over a year without a proposed confirmable plan.
xiii. In re Investors Lending Group, LLC, 489 B.R. 307 (Bankr. S.D. Ga. 2013)
Issue: Whether a creditor that agreed to a the value of its collateral in the disclosure statement approval process was judicially estopped from later claiming that such values were incorrect and needed to be lower. Whether, in a partial "debt-for-dirt" plan, the court should use a liquidation value or a fair market value to value collateral being surrendered to the secured creditor as the indubitable equivalent of its loan.
Holding: The court held that the secured creditor was judicially estopped from asserting the value of its collateral should be lower than the value it had previously agreed to in the disclosure statement approval process. Nonetheless, the court held that it should value collateral in a "debt- for-dirt" conservatively to ensure that a secured creditor being forced to accept its collateral in full satisfaction of its loan is truly receiving the indubitable equivalent. Several disclosure statements and plan were proposed in this case. After the proposal of a plan that provided a secured creditor with partial "debt-for-dirt" treatment--where the debtor surrenders part of an over-secured creditor's collateral in full satisfaction of its claim--the over-secured creditor argued that the values for its collateral--its collateral consisted of twelve properties--was too high and should be reduced to the market value that its appraiser had computed. The debtor and the creditors' committee that proposed the joint plan agreed to the over-secured creditor's value of the properties. The proposed plan at issue in the case was amended to surrender more of the over-secured creditor's property to equal the indubitable equivalent of its claim. The over- secured creditor objected stating that a liquidation or foreclosure value, as opposed to the fair market value it agreed to earlier, should be used for property being surrendered because of the costs to the creditor for selling distressed property. The court agreed that property should be valued based on it proposed use, which in this case was a liquidation or foreclosure value. Then
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