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vi. In re RYYZ, LLC, 490 B.R. 29 (Bankr. E.D.N.Y. 2013)
Issue: Whether single asset real estate (SARE) debtors established that their plan had a "reasonable possibility" of being confirmed.
Holding: The bankruptcy court held that the SARE debtors failed to meet their burden of establishing that their plan had a "reasonable possibility" of being confirmed. A secured creditor moved for stay relief on the grounds that the SARE debtors did not have a plan with a reasonable possibility of being confirmed and that they failed to timely make payments. The secured creditor was so under-secured that its unsecured claim dominated the class of unsecured creditors. Thus, the court found that the SARE debtors could not show a validly impaired class would accept the plan. The court also found that the debtors attempted to artificially impair the tenant class to meet 11 U.S.C. § 1129(a)(10). The court sided with the majority view that an artificially impaired class was insufficient to meet the requirement of an impaired class voting in favor of plan to permit cramdown. Additionally, the court found that the SARE debtors' proposed plan did not pay unsecured creditors in full and yet, allowed equity holders to retain their interest in violation of the absolute priority rule. The court held that the above, along with the SARE debtors' failure to make timely post-petition payments to the secured creditor, warranted the lifting of the automatic stay.
vii. In re Creekside Senior Apartments, L.P., 489 B.R. 51 (B.A.P. 6th Cir. 2013)
Issue: Whether the bankruptcy court in jointly administered single asset real estate (SARE) cases abused its discretion in dismissing the debtors' cases "for cause" under 11 U.S.C. § 1112 (b).
Holding: The court affirmed the bankruptcy court's determinations that there was a continuing loss to or diminution of estate assets and that the debtors did not have a reasonable likelihood of rehabilitation so as to provide cause for dismissal. The court relied on evidence that the debtors would have negative cash flow through 2020. Additionally, the debtors were claiming tax credits on the low income housing property, and they admitted that the value of the property declined with each tax credit. The court found that the bankruptcy court did not abuse its discretion in finding "that there was a continuing loss to or diminution of estate assets." The court also relied heavily on the fact that the debtors were not making adequate protection payments and did not appear to be able to make payments in the foreseeable future as evidence of not having a reasonable likelihood of rehabilitation. The court concluded that the two prongs of 11 U.S.C. § 1112(b)(4)(A) were met and the bankruptcy court properly dismissed the jointly administered cases.
©2014 William L. Norton III
