Bankruptcy Law Insights : Kelley Drye & Warren LLP Bankruptcy and Restructuring Practice Group

The U.S. Supreme Court will rule this term in RadLAX Gateway Hotel Inc. v. Amalgamated Bank on whether the Bankruptcy Code permits a debtor in a chapter 11 case to sell encumbered assets without providing the secured lender an opportunity to credit bid its debt. Determination of this question will require the Court essentially to choose between two opposing approaches to statutory interpretation, and decide whether the so-called “plain meaning” of a highly formalistic reading of the Bankruptcy Code should trump decades of established commercial practice.   

A circuit split arose earlier this year, when the Seventh Circuit in River Road Hotel Partners, a companion case to RadLAX Gateway Hotel, declined to follow the Third Circuit’s 2010 decision in Philadelphia Newspapers, and instead expressly adopted the position set forth in the dissenting opinion from that case of Judge Tom Ambro. As previously described on this site, the debtor in River Road sought to rely on Philadelphia Newspapers in putting forward a plan of reorganization that proposed an auction of the secured lenders’ collateral, but would have expressly denied the lenders the right to credit bid their debt.  Section 1129(b)(2)(A) of the Bankruptcy Code describes three different means by which a plan of reorganization can be found to be “fair and equitable” and thus capable of being confirmed without the consent of a secured lender class (i.e., “crammed down”):

(i) lender retention of liens securing the obligations and receipt of the present value of its secured claim,

(ii) sale of collateral free and clear of liens but subject to credit bidding, or

(iii) the realization by the creditor of the “indubitable equivalent” of its secured claim.

Notwithstanding the express reference in subsection (ii) of Section 1129(b)(2)(A) to the right to credit bid in connection with a sale “free and clear” of liens, the Third Circuit in Philadelphia Newspapers held that a sale “free and clear” could also take place without allowing the lenders to credit bid under subsection (iii), the “indubitable equivalent” prong.  The Third Circuit concluded that the “plain meaning” of the use of the disjunctive “or” in the statute shows that subsection (ii) is not the “exclusive means” by which a secured lender’s collateral may be sold “free and clear” under a plan of reorganization and that, so long as the debtor or other plan proponent could show that the “indubitable equivalent” prong were being satisfied, the opportunity to credit bid need not be provided. 

Judge Ambro, a longtime bankruptcy practitioner before being named to the bench, castigated the majority’s refusal to look beyond what it viewed as the sole plausible reading of Section 1129(b)(2)(A).  In Judge Ambro’s view, the result flew in the face of both the established principle that property rights in bankruptcy look to applicable non-bankruptcy law, and the expectation that the Bankruptcy Code expressly protects such non-bankruptcy rights -- particularly the right of a secured creditor to look to its collateral in the event of non-payment. As he wrote, “In effect, a single ‘or’ becomes the bell, book and candle that excommunicates Congressional intent from the Bankruptcy Code . . . [and] upset[s] three decades of secured creditors’ expectations[.]”

The bankruptcy judge in River Road expressly rejected the reasoning of the Philadelphia Newspapers majority. The Seventh Circuit unanimously agreed, stating that “like the bankruptcy court, we find the statutory analysis articulated by Judge Ambro in his Philadelphia Newspapers dissent to be compelling.” 

The RadLAX Gateway Hotel debtor sought a writ of certiorari from the Supreme Court. They were joined by the Loan Syndication and Trading Association (“LSTA”), a loan market participants’ industry group that has been strongly supportive of lenders’ credit bidding rights. The LSTA announced that it “decided to support the appeal to the Supreme Court because, although [RadLAX Gateway Hotel] is a favorable ruling, the benefit to the market of certainty on credit bidding is an opportunity that cannot be missed.” 

The Supreme Court has not been consistent in its approach to Bankruptcy Code interpretation. While it has strictly applied the “plain meaning” approach in several recent bankruptcy cases, at other times it has been willing to look to underlying Congressional purpose. The latter approach here will unquestionably result in an affirmation of the Seventh Circuit. The former will leave the LSTA regretting that it got what it asked for.

• Email This
• Print
• Trackbacks

Critics of last year’s decision on credit bidding by the Third Circuit Court of Appeals in the Philadelphia Newspapers chapter 11 case welcomed the Seventh Circuit’s recent unanimous opinion in River Road Hotel Partners LLC. The Seventh Circuit expressly adopted the Judge Tom Ambro’s cogent analysis in his Philadelphia Newspapers dissent.   

In River Road, the debtors sought to rely on Philadelphia Newspapers in putting forward a plan of reorganization that proposed an auction of the secured lenders’ collateral, but would have expressly denied the lenders the right to credit bid their debt. The rationale in both cases rested on a formalistic reading of Section 1129(b)(2)(A) of the Bankruptcy Code. That section describes three different means by which a plan of reorganization can be found to be “fair and equitable” and thus capable of being confirmed without the consent of a secured lender class (i.e., “crammed down”):

   (i) lender retention of liens securing the obligations and receipt of the present value of its secured claim,

   (ii) sale of collateral free and clear of liens but subject to credit bidding, or

   (iii) the realization by the creditor of the “indubitable equivalent” of its secured claim.

Notwithstanding the express reference in subsection (ii) of Section 1129(b)(2)(A) to the right to credit bid in connection with a sale “free and clear” of liens, the Third Circuit in Philadelphia Newspapers held that a sale “free and clear” could also take place without allowing the lenders to credit bid under subsection (iii), the “indubitable equivalent” prong. The River Road debtors asked the bankruptcy court to follow the Third Circuit’s conclusion that the “plain meaning” of the use of the disjunctive “or” in the statute shows that subsection (ii) is not the “exclusive means” by which a secured lender’s collateral may be sold “free and clear” under a plan of reorganization and that, so long as the debtor or other plan proponent could show that the “indubitable equivalent” prong were being satisfied, the opportunity to credit bid need not be provided.

The bankruptcy judge, Judge Bruce Black of the Northern District of Illinois, declined the invitation. Judge Black expressly rejected the reasoning of the Philadelphia Newspapers majority, stating that he found the dissent from Judge Ambro, “well-reasoned [and] more persuasive.” At the River Road debtors’ request, Judge Black certified an appeal directly to the Seventh Circuit. The court affirmed Judge Black’s decision, stating that “like the bankruptcy court, we find the statutory analysis articulated by Judge Ambro in his Philadelphia Newspapers dissent to be compelling.”

The Seventh Circuit decision first takes aim at the contention that there exists a single “plain meaning” interpretation of Section 1129(b)(2)(A) that directs the result. 

Nothing in the text of Section 1129(b)(2)(A) directly indicates whether Subsection (iii) can be used to confirm any type of plan or if it can only be used to confirm plans that propose disposing of assets in ways that can be distinguished from those covered by Subsections (i) and (ii). Hence, there are two plausible interpretations of the statute: one that reads Subsection (iii) as having global applicability and one that reads it as having a more limited scope.

The Seventh Circuit then considered whether Congress, having specified in Section 1129(b)(2)(A)(ii) the means by which a debtor could confirm a plan when proposing to sell a secured lender’s assets free and clear, i.e., by expressly protecting the lender’s right to credit bid, would then negate such protection in the immediately following subsection by permitting the debtor to conduct a “free and clear” sale without allowing for credit bidding. “The infinitely more plausible interpretation,” the court held, would only permit “free and clear” collateral sales as specified in subsection (ii). “Under such a reading, plans could only qualify as ‘fair and equitable’ under Subsection (iii) if they proposed disposing of assets in [a] way that [is] not described in [Subsection (ii)].”  

The Seventh Circuit’s vigorous seconding of Judge Ambro’s approach shows plainly why judges take the time to publish dissenting opinions. Judge Ambro, writing from a practitioner’s pragmatic viewpoint, clearly found it hard to accept the Philadelphia Newspapers majority’s refusal to look beyond what it viewed as the sole plausible reading of Section 1129(b)(2)(A) and consider any sense of Congressional purpose or the underlying principles of the Bankruptcy Code as evidenced by complementary Code sections. As he wrote, “In effect, a single ‘or’ becomes the bell, book and candle that excommunicates Congressional intent from the Bankruptcy Code . . . [and] upset[s] three decades of secured creditors’ expectations[.]” The Seventh Circuit’s decision in River Road vindicates Judge Ambro’s arguments.

• Email This
• Print
• Trackbacks

As discussed in previous posts on this site, back in December the Second Circuit Court of Appeals issued a summary order that reversed the bankruptcy court’s confirmation of the reorganization plan (the “Plan”) of DBSD North America, f/k/a ICO North America (“DBSD”). The Court sustained a challenge to the Plan brought by Sprint-Nextel, an unsecured creditor, against the proposed “gift” of value from second lien secured creditors down to DBSD’s equity holder, by-passing holders of unsecured claims. However, it denied the appeal brought by senior secured creditor DISH Network (“DISH”), the holder of all of DBSD’s first lien debt, against its unfavorable treatment under the Plan.  The summary order stated that an opinion would follow “in due course”. (Kelley Drye & Warren LLP represents the agent to the lenders that previously held the first lien debt purchased by DISH, but has taken no part in the litigation over the confirmation of the Plan or the appeals before the Second Circuit).   

The opinion has now come out and has appropriately garnered wide attention. The decision to prohibit the long-standing practice of “gifting” value to a junior class of creditors or interests over the objection of a non-consenting intermediate class will certainly shape the contours of plan negotiations in chapter 11 cases going forward. The determination to uphold the “designation” (i.e., disallowance) of DISH’s vote against the Plan, for its alleged “bad faith” in pursuing a “strategic purpose”, will also affect the purchase and sale of claims for purposes of acquiring control of companies as they emerge from bankruptcy (although this ruling was fact specific and narrowly focused). 

However, the Second Circuit’s opinion is equally important for what it did not say. The bankruptcy court had ruled that because DISH was the sole member of its Plan class and its vote against the Plan was disallowed, the Plan class should be deemed to have accepted the Plan. The bankruptcy court concluded that the Plan therefore did not have to satisfy the cramdown standards of Section 1129(b)(2)(A) of the Bankruptcy Code with respect to DISH. Nevertheless, the bankruptcy court alternatively ruled that the proposed Plan treatment of DISH’s first lien did in fact meet the cramdown standard of Section 1129(b)(2)(A)(iii), by providing DISH with the “indubitable equivalent” of its claim. The Second Circuit, in upholding the bankruptcy court’s decision ruling regarding vote designation, specifically stated that it would not address the bankruptcy court’s alternate ruling that DISH could be crammed down.   

The “indubitable equivalent” standard under Section 1129(b)(2)(A)(iii) allows a debtor to confirm a plan over a secured creditor’s objection so long as it gives the creditor the present value of its secured claim and provides substitute collateral that is of equal value and of no greater risk than its existing collateral.  The first lien debt purchased by DISH was a one year note that paid cash interest, and was secured by all of DBSD’s operating assets plus its only liquid assets -- a portfolio of auction rate securities (the “Securities”). The Plan proposed to provide a new note with a four year maturity, non-cash (i.e., payment in kind (“PIK”)) interest, and liens on all of reorganized DBSD’s operating assets -- but not on the Securities, which are to be used to help fund ongoing operations. In addition to appealing the designation of its Plan vote, DISH argued to the Second Circuit that it could not be forced to accept the heightened risk of a four year note and a diminished collateral package that deprived it of its lien on the Securities with no substitution. 

A ruling by the Second Circuit affirming the cramdown judgment by the bankruptcy court -- a determination that a one year loan facility secured by liquid assets could be replaced under the “indubitable equivalent” standard by a four year PIK facility with non-liquid collateral -- would have had a huge impact in future cases, altering the relative leverage among secured creditors, debtors and junior creditors. The decisions on gifting and designation make DBSD a significant opinion. A ruling on cramdown would have made it a seminal one.

• Email This
• Print
• Trackbacks

The Second Circuit Court of Appeals issued a summary order this week upholding the aggressively unfavorable treatment of a senior secured creditor under the reorganization plan (the “Plan”) of DBSD North America, f/k/a ICO North America (“DBSD”). (The Second Circuit upheld a separate challenge to the plan brought by an unsecured creditor). The summary order states that “[a]n opinion will follow in due course.”   

As previously described on this site, the bankruptcy court took the highly unusual step of “designating” (i.e., disallowing) the vote rejecting the Plan of the senior secured creditor (also a competitor of DBSD). The bankruptcy court’s finding that the vote was “not in good faith” because the senior secured creditor was acting with a “strategic purpose”, rather than merely seeking to further its interest as a creditor looking to be repaid, raised eyebrows throughout the bankruptcy community (and particularly among investment firms that regularly acquire debt with such a strategic purpose). But it was the bankruptcy court’s decision to approve the unfavorable proposed treatment of the senior secured creditor that is likely to have the most potential long term impact. 

The bankruptcy court determined that the Plan met the applicable Bankruptcy Code standards, and could be confirmed over senior secured creditor’s objection (colloquially known as a “cram down”) by providing it the with the “indubitable equivalent” of its secured claim. In an expansive interpretation of the statutory language, the bankruptcy court found such “indubitable equivalence” notwithstanding that the Plan effects the replacement of a one year loan facility secured by all of DBSD’s assets – including liquid securities – with a four year “payment in kind” facility under the same rate of interest, with a reduced collateral package that lacks such securities.   

The bankruptcy court’s determinations both to designate the vote and to approve the “cram down” treatment were alternative bases for approving the Plan. The Second Circuit’s summary order refers only to the vote designation Accordingly, it won’t be known until the Second Circuit issues its opinion whether it has ruled on both aspects of the decision. 

The unusual facts regarding the vote designation make it probable that the impact of the Second Circuit’s ruling as it relates to this issue will be relatively narrow. However, if the Second Circuit expressly affirms the “cram down” aspect of the bankruptcy court’s decision, it will have a profound impact in Chapter 11 cases. The door will be open to all manner of creative and forceful attempts to confirm reorganization plans over the objections of secured lenders.

• Email This
• Print
• Trackbacks

The chapter 11 case of DBSD North America, Inc. (“DBSD”), f/k/a ICO North America, has been marked by aggressive tactics and extreme positions from its commencement.  DBSD, a non-operating satellite communications company, and its second lien noteholders made clear their intent to cram down a plan of reorganization (the “Plan”) on DBSD’s first lien lenders.  A competitor of DBSD (the “Competitor”) bought the first lien debt and then found itself sanctioned for seeking to use its acquired position to effect a takeover of DBSD.  The Competitor appealed the Plan confirmation order, (pdf) and this week the Second Circuit, on the eve of the Plan becoming effective, issued a stay “to preserve the status quo pending the outcome of this appeal.”   

Prepetition, DBSD had a first lien loan of $40 million (the “Senior Debt”) and second lien secured notes of approximately $750 million (the “Junior Debt”).  The Senior Debt was secured by all of DBSD’s operating assets plus its only liquid assets -- a portfolio of auction rate securities (the “Securities”).  The noteholders agreed to exchange the Junior Debt for equity in reorganized DBSD.  The Plan proposed to provide the Senior Debt with a new note that extended the maturity of the Senior Debt from one year to four years, provided payment in kind (“PIK”) interest, and liens on all of reorganized DBSD’s operating assets -- but not on the Securities, which were to be used to help fund ongoing operations.  The original first lien lenders sold 100% of the Senior Debt at par value to the Competitor, which then voted to reject the Plan. 

The bankruptcy court (the “Court”) took the highly unusual step of designating (i.e., disallowing) the Competitor’s rejecting Plan vote as “not in good faith” under Section 1126(e) of the Bankruptcy Code.  The Court determined that “good faith” was lacking because the Competitor was acting with a “strategic purpose”, rather than merely seeking to further its interest as a creditor looking to be repaid.  The Court based its ruling, among other things, on the Competitor’s payment of par value for the Senior Debt at a point when the disclosure statement for the Plan had already been approved.  This decision has caused great concern among distressed investment funds that routinely buy up debt at a discount as a means acquiring companies out of chapter 11 cases.   

The next part of the Court’s decision further raised eyebrows throughout the bankruptcy community.  The Court determined that because the Competitor was the sole member of its Plan class, the Plan class should be deemed to have accepted the Plan.  As a result, the Court held that the Plan did not have to satisfy the cramdown standards of Section 1129(b)(2)(A) of the Bankruptcy Code with respect to the Competitor. 

These events have justifiably drawn attention.  Less noticed, however, has been the next part of the Court’s ruling.  After candidly noting that the issue of treating the designated rejecting vote of a single creditor class as an accepting vote is “one of first impression” and “[a]s against the possibility that a higher court in this Circuit might adopt the contrary view,” the Court went on and determined that the proposed Plan treatment of the Senior Debt did in fact meet the cramdown standard of Section 1129(b)(2)(A)(iii), by providing the Competitor with the “indubitable equivalent” of its claim. 

The “indubitable equivalent” standard under Section 1129(b)(2)(A)(iii) has generally been viewed as allowing a debtor to cram down a plan on an objecting secured creditor so long as it gives the creditor the present value of its secured claim and provides substitute collateral that is of equal value and of no greater risk than its existing collateral.  In addition to appealing the designation of its Plan vote, the Competitor has argued to the Second Circuit that it cannot be forced to accept a diminished collateral package that deprives it of its lien on the Securities with no substitution. 

It is this aspect of DBSD that, if affirmed by the Second Circuit, will likely a have greater impact in future cases on the relative leverage between secured creditors, and debtors and junior creditors.  The Court’s decision to designate the Competitor’s vote, while of understandable concern to distressed investment funds, was very fact specific and narrowly focused.  On the other hand, the Court’s determination that a one year loan facility secured by all of DBSD’s assets – including the Securities -- could be replaced under the “indubitable equivalent” standard by a four year PIK facility under the same rate of interest, with a reduced collateral package that lacks such Securities, could have a broad impact by opening the door to all manner of creative and aggressive attempts to cram down (or perhaps more precisely, “cram up”) secured lenders.  

The Second Circuit’s issuance of a stay this week suggests that it may very well recognize the ramifications of the Court’s decision.  

• Email This
• Print
• Trackbacks (1)

The Texas Rangers Chapter 11 case is finally winding down, following several weeks of nearly non-stop legal wrangling and high stakes drama. Rangers Baseball Express, LLC (“RBE”), a group fronted by legendary pitcher Nolan Ryan, emerged as the winner following a lengthy and raucous auction. 

There are numerous lessons which can be drawn from this fascinating case (particularly regarding professional major league sports franchise bankruptcies). However, one truism especially stands out: 

·                    Chapter 11 provides a highly effective mechanism for expeditiously resolving complex legal and financial logjams when consensus exists among the major parties. 

·                    Chapter 11 also offers an effective forum and provisions that can be used to “cram down” dissenting parties in the absence of such consensus. 

·                    Chapter 11 does NOT, however, readily lead to case resolutions that are both fast AND non-consensual.       

To recap quickly: Texas Rangers Baseball Partners (“TRB Partners”), the partnership entity that held the Rangers’ franchise rights from Major League Baseball and all team assets, and Major League Baseball (“MLB”), favored a sale of the team to RBE. The bank lenders owed $525 million by entities (the “HSG Group Entities”) controlled by Tom Hicks, the Rangers’ indirect owner, refused to consent to the sale to RBE because they believed that a higher sale price for the team could be obtained. Because TRB Partners had guaranteed only $75 million of such debt, TRB Partners, MLB and RBE (the “Plan Proponents”) took an aggressive gamble and sought to use a Chapter 11 filing to effect a quick sale of the team without the consent of the lenders. The case was filed together with a plan of reorganization in an effort to avoid a competitive bidding process, on the theory that because all creditors, including the lenders, would be paid in full the amounts directly owed by TRB Partners, the lenders would be deemed to be “unimpaired” under the Plan and thus presumed to accept it.  

At first, the aggressive strategy appeared to succeed when Judge Michael Lynn ruled that the plan, with some modifications, could proceed towards confirmation. However, the lenders took steps to force certain of the HSG Group Entities which directly owned TRB Partners (“Rangers Equity”) into bankruptcy as well. Judge Lynn ruled that the Rangers Equity entities would be impaired by the plan, and appointed William Snyder as an independent chief restructuring officer. Snyder was authorized to make the determination as to whether such entities could vote to approve the plan consistent with whatever fiduciary obligations they might owe to the lenders.  When he indicated a strong preference for a competitive bid process, the Plan Proponents’ aggressive strategy began to unravel. 

The Plan Proponents’ legal strategy was certainly solid, and it is possible that in a non-fast tracked case the plan could have been confirmed over the lenders’ objections. However, the Plan Proponents were looking for as short a journey through Chapter 11 as possible, as they were facing both the intense public scrutiny under which all major league sports teams operate, and the imperatives of the Major League Baseball schedule, including trading deadlines. Accordingly, there was no margin for error in the Plan Proponents’ strategy. Unfortunately, they were opposed by deep pocketed, well-advised and motivated adversaries who had sufficient legal arguments at their disposal to be able to block a quick confirmation. The Plan Proponents wound up with no choice but to accede to an auction as the only viable means for an expeditious exit. 

Bankruptcy courts are forums that exist fundamentally to maximize the value of assets. In the absence of truly exigent circumstances, it would essentially fly in the face of one of the primary underlying principles of the Bankruptcy Code to allow a sale to take place over creditor objections where strong evidence existed to show that a competitive bidding process would result in higher and better value. The lenders stated it succinctly in one of their many pleadings:  

This extraordinary schedule is not justified by the facts of this case. While this case continues to receive outsized publicity given the Debtor’s industry, it is not Lehman Brothers, Chrysler, GM, or any of the other cases where the debtor’s very existence, or the United States’ economy, hung in the balance. . . The Debtor is fundamentally sound and there is absolutely no need for unreasonable speed to ensure its continued existence – there is no proverbial melting ice cube here.

Ironically, it appears that in the end nearly every party got what it wanted. RBE succeeded in purchasing the team. MLB got its preferred buyer. The lenders that forcefully challenged the process wound up realizing the benefits from a competitive bidding process that maximized the value of the team assets. 

Perhaps even more ironically, the amount realized by the lenders in the end appears close to an amount that, by one account, was on the table in the months of negotiations that preceded the case, but that was pulled when the Chapter 11 case was filed and the parties went to war.

• Email This
• Print
• Trackbacks

Some cases really should not be all that difficult. However, when judges choose to divorce statutory text completely from any reference to underlying legislative intent and long standing commercial practice, inexplicable results follow.  

A few months ago, I wrote of a decision by the U.S. District Court for the Eastern District of Pennsylvania that denied secured lenders the opportunity to credit bid their loans in connection with a sale under a plan of reorganization of the collateral securing their loans. While the substantive matter at issue – the ability to exercise rights against collateral is an essential part of the protection for which a secured lender bargains – was certainly important, what was more disconcerting was the court’s use of the so-called “plain meaning” rule of statutory interpretation to strike down decades of settled commercial law practice. I stated then:   

Philadelphia Newspapers stands as a quintessential example of the anomalous results that can transpire from the “plain meaning” rule. Particularly with a comprehensive statutory scheme as deeply rooted in centuries of commercial law as the U.S. Bankruptcy Code, the ability to focus in on specific language in single provisions, without relation to the greater whole or long understood practice, leads to no end of vexatious litigation and creates uncertainties and ambiguities where none should exist. The Third Circuit Court of Appeals should use this decision as an opportunity to repudiate strongly this mode of statutory interpretation in bankruptcy cases.

Unfortunately, rather than repudiate the “plain meaning” approach, a majority of the Third Circuit panel that heard this case chose to worship at its altar. Unless overturned by en banc review, or (highly unlikely) by the Supreme Court, the majority’s approach to statutory interpretation and the anomalous result engendered here are binding law within the Third Circuit, including the influential U.S. Bankruptcy Court for the District of Delaware. 

The majority opinion in Philadelphia Newspapers noted that Section 1129(b)(2)(A) of the Bankruptcy Code describes three different means by which a plan of reorganization could be confirmed without the consent of a secured lender class:

1. lender retention of liens securing the obligations and receipt of the present value of its secured claim,
2. sale of collateral free and clear of liens but subject to credit bidding, or
3. the realization by the creditor of the “indubitable equivalent” of its secured claim. 

Notwithstanding the express reference in subsection (ii) of Section 1129(b)(2)(A) to the right to credit bid in connection with a sale “free and clear” of liens, the Court held that a sale “free and clear” could also take place without allowing the lenders to credit bid under the “indubitable equivalent” prong. For the Court, the “plain meaning” of the use of the disjunctive “or” in the statute shows that subsection (ii) is not the “exclusive means” by which a secured lender’s collateral may be sold under a plan of reorganization and that, so long as the debtor or other plan proponent could show that the “indubitable equivalent” prong were being satisfied, then the opportunity to credit bid need not be provided. 

The majority opinion in Philadelphia Newspapers was met by a lengthy dissent. Not surprisingly, this came from the leading bankruptcy expert on the Third Circuit panel, Judge Thomas Ambro, a respected practitioner of many years. In addition to pointing out the flaws in the majority’s reading of the statutory language as “unambiguous”, Judge Ambro noted that the result flies in the face of both the well established principle that property rights in bankruptcy look to applicable non-bankruptcy law, and the long standing expectations that underlie secured lending transactions. Judge Ambro strongly criticized the majority’s refusal to look beyond what it viewed as the sole plausible reading of Section 1129(b)(2)(A) and consider any sense of Congressional purpose or the underlying principles of the Bankruptcy Code as evidenced by complementary Code sections. “In effect, a single ‘or’ becomes the bell, book and candle that excommunicates Congressional intent from the Bankruptcy Code . . . [and] upset[s] three decades of secured creditors’ expectations[.]”

• Email This
• Print
• Trackbacks