Credit Bid: “This Is Not Rocket Science”

Posted on June 28, 2013 by BankruptcyRealEstateInsights

Fire Eagle L.L.C. v. Bischoff (In re Spillman Dev. Group Ltd.), 710 F.3d 299 (5th Cir. 2013) –

A bank made loans to the debtor to finance construction of a golf course.  The loans were secured by senior liens on the debtor’s assets, limited guaranties of its principals, and a $1.2 million certificate of deposit.  During a sale of the debtor’s assets ordered by the bankruptcy court, the holder of the senior debt submitted a credit bid.  Spillman involved a dispute over the effect of the credit bid. Continue reading →

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Artificial Impairment of Claims: Can The Tail Wag The Dog in Confirming a Plan?

Posted on June 25, 2013 by BankruptcyRealEstateInsights

Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P. (In re Village at Camp Bowie I, L.P.), 710 F.3d 239 (5th Cir. 2013) –

To confirm the debtor’s proposed plan of reorganization over the mortgage lender’s objections, the plan had to be accepted by an impaired class of creditors.  There were two impaired classes:  (1) a class that consisted of the mortgage lender with a secured claim of ~$32 million, and (2) the unsecured trade creditors class, which consisted of 38 creditors holding a total of ~$60,000 in unsecured claims.  The trade creditors voted to accept the plan, while the mortgage lender voted against.

The trade creditors were impaired because the plan proposed to pay the claims within three months after the plan became effective without interest.  The lender objected on the basis that the trade claim class was artificially impaired, so that it could not count as the required impaired accepting class.   The bankruptcy court confirmed the plan, and the lender appealed. Continue reading →

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Special Purpose Entities: What Recourse Does A Lender Have When SPEs Are Consolidated Pre-Bankruptcy? … Maybe None

Posted on June 21, 2013 by BankruptcyRealEstateInsights

Fed. Nat’l Mortgage Ass’n v. Bruckner, 489 B.R. 93 (E.D. Wis. 2012) –

The debtor (Buckner) owned 36 rental projects (containing ~ 1300 rental units) through various limited liability companies.  The LLCs transferred all of the properties to Buckner a few days before he filed a chapter 11 bankruptcy.  Fannie Mae, which held mortgages on three of the properties, contended that these transfers were improper.  Consequently, it argued that it was entitled to some form of relief, such as  relief from the automatic stay, dismissal of the bankruptcy case, or a ruling that the properties subject to its mortgages were not property of the debtor’s estate.  The bankruptcy court denied the requested relief, and Fannie Mae appealed to the district court. Continue reading →

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Prime-Plus Cramdown Rate: You Can Forget Market Reality

Posted on June 18, 2013 by BankruptcyRealEstateInsights

Wells Fargo Bank Nat’l Ass’n v. Texas Grand Prairie Hotel Realty, L.L.C. (In re Texas Grand Prairie Hotel Realty, L.L.C.), 710 F.3d (5th Cir. 2013) –

In this case the debtors proposed a plan of reorganization for four hotel properties.  The plan was rejected by the mortgage lender (Wells Fargo), so they sought to cramdown the plan under Section 1129(b) of the Bankruptcy Code.  The plan valued Wells Fargo’s secured claim at ~$39 million and proposed to pay off the loan over 10 years with interest accruing at 5% (1.75% over prime).  The bankruptcy court confirmed the plan; the district court affirmed; and Wells Fargo appealed to the 5th Circuit. Continue reading →

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Funding Commitment: “Inure to the Benefit of the Parties Hereto” May Not Mean What You Think It Means

Posted on June 14, 2013 by BankruptcyRealEstateInsights

Avenue CLO Fund Ltd. v. Bank of America, N.A., 709 F.3d 1072 (11th Cir. 2013) –

This case involves a failed Las Vegas casino-resort development that was to be funded by revolving loans and term loans, as documented in a series of agreements, including a credit agreement and a disbursement agreement.  The developers filed bankruptcy within a few months after the revolving lenders declined to fund a draw request.  Both the debtors and the term loan lenders sued the revolving loan lenders alleging a breach of contract.  The district court denied the debtors’ motion for partial summary judgment and dismissed the term loan lenders case on the basis that they lacked standing.  The 11th Circuit considered both cases on a consolidated basis. Continue reading →

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Potential Claims: Don’t Forget ILSA (Federal Interstate Land Sales Full Disclosure Act)

Posted on June 11, 2013 by BankruptcyRealEstateInsights

Ross v. R.A. North Development, Inc. (In re Total Realty Management, LLC), 706 F.3d 245 (4th Cir. 2013) –

Interstate land sales may be subject to registration and anti-fraud provisions under the Federal Interstate Land Sales Full Disclosure Act (ILSA).  In addition to civil and criminal penalties, a purchaser may sue for damages in connection with a violation.  The chapter 7 trustee for a developer debtor sued other development companies (and their sales and marketing affiliates) seeking contribution for the debtor’s potential liability under ILSA on the grounds that they engaged in a scheme with the debtor to sell properties at inflated prices.  The district court dismissed the claims, and the trustee appealed to the 4th Circuit. Continue reading →

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