Confirmation Requirements

“The requirements, set out in Section 1129, that a plan proponent must satisfy to obtain confirmation of its Chapter 11 plan. One of those requirements is the do-or-die requirement that if any class is impaired under the plan, at least one impaired class must accept the plan by two-thirds in amount and a majority in number of those voting. The proponent must also show, among other things, that:

• The plan is feasible
• Creditors will receive under the plan at least as much as they would receive if the debtor’s assets were liquidated under Chapter 7.

If any impaired class does not accept the plan, the proponent of the plan can ask the court for a “cramdown” of the plan on the non-accepting classes. A successful cramdown, however, requires a showing that the plan:

• Is fair and equitable to any non-accepting impaired class.
• Does not unfairly discriminate against any non-accepting impaired class.
• Does not violate the absolute priority rule.”

This definition is courtesy of our friends at Polsinelli who publish the Devil’s Dictionary of Bankruptcy Terms. You can access the Devil’s Dictionary here.

For more information about confirmation requirements, read Dealing with Distress for Fun & Profit— Installments #18-20: How to Confirm a Chapter 11 Plan, Chapter 11 Plan Acceptance, Getting a Class to Accept a Plan, and A Primer on Plan Support Agreements & Restructuring Support Agreements