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June 27, 2013

Two Recent Circuit Court Decisions on Cram Down

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Two recent decisions by United States Circuit Courts of Appeal separately address the rights of secured creditors, unsecured creditors and equity holders under cram down plans of reorganization. In Wells Fargo Bank National Association v. Texas Grand Prairie Hotel Realty, LLC, the United States Court of Appeals for the Fifth Circuit upheld a bankruptcy court’s determination of the appropriate rate of interest payable to the holder of a secured claim whose claim was being paid over time under a cram down plan, despite the spread above prime from which the interest rate was derived being lower than a third party would be willing to lend on. In Castleton Plaza, LP, the United States Court of Appeals for the Seventh Circuit held that an insider of a shareholder relying on the “new value” exception to the absolute priority rule must, like an existing shareholder, expose the opportunity to competition.

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Authors and Contributors

Fredric Sosnick

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Financial Restructuring & Insolvency

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Clifford Atkins

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