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retain its lien, but also intended to strip down that lien from $722,000 to $300,000, with that lower secured amount being paid over 30 years at 4% interest, yet debtor offered no evidence demonstrating that the value of secured creditor's lien was any less than what the claim said it was. the proposed treatment of the secured claim was neither fair nor equitable; and
(3) the proposed plan violated the absolute priority rule.
ix. In re LMR, LLC, 496 B.R. 410 (Bankr. W.D. Tex. 2013)
Issue: Whether the debtor successfully met the requirements for cramdown notwithstanding a secured creditor's objection.
Holding: The court held that the debtor could successfully cram down its plan over a secured creditor's objection. The debtor was a hotel owner and the secured creditor objected to plan confirmation on several grounds, including, among others, the feasibility of the plan, the interest rate provided by the plan, and lack of good faith. The secured creditor's claim was bifurcated under 11 U.S.C. § 506(a), leaving an allowed secured claim of $3.2 million. The court found that the 6% interest rate to be paid on the secured claim provided the creditor with the present value of its secured claim. The national prime rate was 3.25%, leaving the adjusted risk rate at 2.75%. Based on the facts of this case, the court found the adjusted risk rate could have been lower. Among others, the court found that the debtor was well managed, recent revenues had exceeded projections, the collateral was increasing in value, the local hotel market and general economy was improving, and the plan provided the objecting creditor with collateral sufficient to secure payments on both its secured and unsecured claims, as well as short cure periods in the event of the debtor's default. The court also found that the 6% interest rate was sufficient on the deferred payments for the unsecured portion of the objecting creditor's claim. The plan was feasible because the court found the debtor could likely refinance by the end of the plan term and that even conservative projections indicated that plan payments were realistic. The court found good faith because the debtor legitimately sought to reorganize and showed a reasonable likelihood of success. Lastly, the court found that the plan was in the best interest of the creditors because a hypothetical Chapter 7 would only partially satisfy the secured creditor's claim. The debtor's plan provided full payment over five years to all its creditors.
x. In re Texas Star Refreshments, LLC, 494 B.R. 684 (Bankr. N.D. Tex. 2013)
Issue: Whether the debtor's plan met the requirements for cramdown.
Holding: The bankruptcy court held that the debtor limited liability company's plan was proposed in good faith, was accepted by a non-insider impaired class, was feasible, and satisfied the requirements for cramdown. The creditor objecting the debtor's plan argued that the debtor lacked good faith because it misappropriated loan proceeds, as evidenced by a state court judgment. However, the court found that the plan proposed to pay that judgment in full with interest and had a rehabilitative purpose as required for good faith. The objecting creditor also
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