Commercial Law World - Issue 1, 2018 - 18
2014) (adopting Till rate and finding that debtor's plan was not
feasible whether using debtor's unsupported Till-proposed rate
of 5.0% rather than the more likely 6.25%); In re K&K Holdings,
LLC, No. 12 B 23916, 2014 Westlaw 585953, at *13 (Bankr.
N.D. Ill. Feb. 13, 2014) (explaining methodology in Chapter
11 cramdown cases also involve "a two-step analysis, asking
first whether an efficient market exists for this type of loan");
In re GAC Storage El Monte, LLC, 489 B.R. 747, 764 (Bankr.
N.D. Ill. 2013) (following Till footnote 14 by considering
market rate in context of Chapter 11 cramdown). See also
In re Nw. Timberline Enters., 348 B.R. 412, 432 (Bankr. N.D.
Tex. 2006) ("stating that "one might have plenty of evidence
of what an available market rate is for a similar loan to the
Chapter 11 debtor at issue, since there is a universe of lenders
who regularly make exit loans to Chapter 11 debtors."). To
determine whether there is a market for the loan at issue, most
courts look to expert evidence and evidence of loan offers. See,
e.g., In re Deep River Warehouse, Inc. 2005 Westlaw 2319201,
at *12 (Bankr. M.D.N.C. Sept. 27, 2005). Courts have held
that markets for financing are efficient where "they offer a loan
with a term, size, and collateral comparable to the forced loan
contemplated under the cramdown plan." MPM Silicones, 874
F.3d at 800 (quoting In re Texas Grand Prairie Hotel Realty,
LLC, 710 F.3d 324 337 (5th Cir. 2013).
In Momentive Performance Materials, Inc. v. BOKF (In the
Matter of MPM Silicones, LLC), 874 F.3d 787, 800-801 (2d
Cir. Oct. 20, 2017), the Second Circuit added an important
imprimatur to the two-tiered cramdown interest rate approach.
The MPM Silicones case addressed whether the interest rates
ascribed to replacement notes, which allowed the Debtor to
pay the notes in deferred payments, was fair and equitable
under Code Section 1129(b). The Second Circuit determined
that footnote 14 of Till endorsed the two-tiered approach,
which was consistent with "long-standing precedent dictating
that 'the best way to determine value is to exposure to a
market." Till¸ 874 F.3d at 800 (citing, inter alia, Bank of Am.
Nat'l Trust and Sav. Ass'n v. 203 N. LaSalle St. P'ship, 526 U.S.
434, 457 (1999) (advocating market test for determining value
of debtor's equity) (remaining citations omitted).
In summary, while many bankruptcy courts still apply the
Till "prime plus" interest rate approach, an emerging majority
of courts, including the Second Circuit, are adopting the twotiered approach, which first asks whether there is an efficient
market for the exit financing sought in the Chapter 11 case,
and if not, provides that the Till formula rate should apply.
This approach will likely benefit secured creditors in future
cramdown cases, because either the efficient market rate or
the Till formula rate typically will prove more faithful to the
present value requirement for cramdown in Code Section
1129(b) than non-market-based approaches that debtors
18 COMMERCIAL LAW WORLD
by Theodore J. Hamilton, Esq.
The influence of the Commercial
Law League in the legislative history
regarding bankruptcy in the U.S. comes
alive in this article from the League
publication in The Bulletin from 1917.
For the longest time, I agreed with
the statement in the Article that asks
"Why are all bankruptcy 'crooks and
deadbeats'?" It wasn't until my uncle,
the former Chief Bankruptcy Judge for
the state of Utah, the Honorable Glen
E. Clark, told me that bankruptcy gives
debtor's a fresh start. I then realized
the benefits to society of a national
bankruptcy law. Since that time, I have
come to see those who take financial
risks that might lead to bankruptcy are
also those that move society ahead.
This article emphasizes and argues
the benefits of bankruptcy laws. The
article also illustrates how the League
has, over the years, influenced the laws
in this area. Even now, the League
continues to move bankruptcy laws
forward through its efforts on Capitol
Hill regarding venue reform. Your
support for these efforts is more
important today than ever. I hope you
enjoy this brief view of history.
Let us know what you think!
Email us at email@example.com.
JAN /FEB /MAR 2018