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Class 1 claimant is paid in cash at the time of the conveyance." The court concluded that "[t]he record does not reveal how the Class 1 claimants' rights have been altered, if at all." Regarding class 3, the court noted that this claim "consists of the secured claim of KSJS in the amount of $119,514.00, which is secured by collateral with a value of $185,900.00. The Amended Plan proposes that KSJS will receive a deed to its collateral in full satisfaction of its secured claim." Thus, class 3 was also unimpaired. The court found that the debtor had "not provided any evidence of a valid business purpose for "impairing" the class 1 and class 3 claims." The court thus disqualified these votes for purposes of determining whether the debtor had obtained the affirmative vote of an impaired class. This left only class 5. After discounting the class 5 votes of insiders, this left the votes of three entities in class 5: Davis Bowen & Friedel, Inc. (with a claim of $14,119.85), Crouse (with a claim of $77,267.60), and Citizens (with a claim in an undetermined amount). The court then examined the previous valuation testimony and determined that the amount of Citizens' deficiency claim was no less than $8.2 million. As such, Citizens' vote controlled class 5, which meant that no impaired class of claims had accepted the plan. Thus, confirmation was denied. The court also granted Citizens' request for relief from the stay, finding that Citizens had met its burden of proof under § 362(d)(1) and (d)(2).
i. In re Tribune Company, et al., 472 B.R. 223 (Bankr. D. Del. 2012)<:/b>
Issue: Whether the court must consider the effect of a subordination agreement in deciding whether a debtor's cramdown plan unfairly discriminates against an objecting class under section 1129(b) of the Code.
Holding: The court held that the proposed plan did not discriminate unfairly against the senior noteholders despite the fact that they were not receiving the full benefit of the subordination agreement entered into with the junior creditors. The court first found that the subordination provisions of the PHONES indenture were applicable to the distributions of settlement proceeds under the proposed plan from the creditors' trust. The court also found that, regarding the EGI notes, the settlement proceeds of the proposed plan and distributions of creditors' trust and litigation trust proceeds were similarly subject to the subordination provision found in the EGI subordination agreement. Next, the court addressed whether the plan unfairly discriminated against the senior noteholders by allowing other unsecured creditors (the Other Parent Claims) to benefit from the PHONES and EGI subordination provisions. The court found that the senior noteholders argument-"that the statute may be read as requiring that a plan must not unfairly discriminate, even before giving effect to third party contractual rights embodied in a subordination agreement, but in any event, a plan cannot be confirmed under § 1129(b) unless the subordination agreements are fully implemented"-was not supported by the case law. The court found that the phrase "notwithstanding section 510(a)" in section 1129(b) meant that court should conduct the unfair discrimination analysis without considering subordination agreements. The court adopted a rebuttable presumption test to determine whether a plan discriminates
©2014 William L. Norton III
