Kuney’s Corner – Giving Secured Creditor Substitute Collateral in a Chapter 11 Cramdown

Pacifying a Hostile Lender with a Motion to Substitute Collateral  Can a Chapter 11 debtor confirm a plan that gives a hostile secured creditor a lien on an orange as a substitute, in essence, for the secured creditor’s lien on an apple that the debtor wants to keep and use?1 Yes, a motion to substitute collateral is valid if the value of the new lien meets the “indubitable equivalent” test with the value of the original lien. Substitute Collateral in Apples and Oranges  Assume that the land-rich but cash-poor Chapter […]

There is a seeming irony here in that a company that files for bankruptcy often does not have the cash to do so. That’s where DIP financing comes in.

A written tour of business bankruptcy and its alternatives Our prior installment discussed some of the basic things a secured creditor needs to know about Chapter 11. The automatic stay was one of them.  But, since we like to keep these things short (on the presumption that others also have short attention spans) we didn’t say all we want to say on the topic (in fact, this installment won’t satiate us either and we will continue to explain other aspects of the automatic stay in future installments). For now, we […]

A written tour of business bankruptcy and its alternatives In our past few installments we’ve been approaching our topic in a more or less chronological manner, explaining what generally happens first, second, third, and so on. We think it useful to switch convention and spend this and the next few installments talking about things from the perspective of specific players. This time, we focus on the secured creditor. What/who is a secured creditor?  Examples include (there are other possibilities): The holder of a real estate mortgage A bank with a […]

A written tour of business bankruptcy and its alternatives Subsequent installments in this series will cover the concepts touched upon here in more detail.  We think it prudent, if not necessary, to at least throw some basic chapter 11 concepts on the table now, however, since they are so fundamental to any Chapter 11 case- regardless of which side of the table you sit on. The Automatic Stay Commencing a bankruptcy case triggers an “automatic stay,” which, with certain exceptions (carved out by §362(b)), operates as an injunction against actions […]