Bankr. No.:
89-50239
Chapter:
11
Date of Decision:
September 29, 1990
Issue:
(1) Whether plan that proposed a non-binding contribution of capital by corporate debtor's principal in an unspecified sum met requirements of absolute priority rule as codified at 11 U.S.C. § 1129(b)? (2) Whether a plan that failed to identify value of undersecured creditor's secured claim was fair and equitable as required by 11 U.S.C. § 1129(b) where undersecured creditor was paid claim in full but other unsecured creditors received nothing?
Ruling:
(1) A non-binding capital contribution of an unspecified sum by a corporate debtor's principal does not fulfill any "new value" or "infusion of new capital" exception to the absolute priority rule. (2) A debtor must justify any discriminatory treatment of similar-type claims by showing: (a) there is a reasonable basis for the discrimination; (b) the debtor cannot consummate the plan without discrimination; (c) the discrimination is proposed in good faith; and (d) the degree of discrimination is in direct proportion to its rationale.
Full Bankruptcy Court Decision:
