Chapter 11 Cram-Up Plans: Overcoming Objections, Non-Curable Defaults, Providing Indubitable Equivalent
Restructuring & Finance Litigation co-chair Stephen B. Selbst and partner Steven B. Smith presented a CLE webinar entitled "Chapter 11 Cram-Up Plans: Overcoming Objections, Non-Curable Defaults, Providing Indubitable Equivalent." The course instructed bankruptcy attorneys about creating and opposing "cram-up" Chapter 11 plans under which the plan is accepted by junior creditors and then crammed up on senior objecting creditors.
Cram-up is an approach to deal with dissenting secured lenders who prefer a quick sale of assets, sometimes at the expense of most other stakeholders. It usually involves restructuring and reinstating the debt under Bankruptcy Code Section 1124 or providing the "indubitable equivalent" of the lender's claim under Section 1129(b). Strategies to pursue and timing depend on many factors, such as the general economic environment, interest rates, the debtor's/borrower's covenant package, and what type of defaults exist. The parties often vigorously litigate the existence of any non-curable defaults unrelated to the borrower's financial conditions.