This is the fifth installment of Chapman and Cutler LLP’s discussion of the proposals contained in the Final Report and Recommendations of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11.
While specific proposals in the Report pose a significant threat to secured creditors, other proposals included in the Report could, in fact, greatly benefit secured creditors. In this client alert, we seek to explore some of these proposals, including:
- Continuing to allow distributions to be based upon collateral’s “going-concern” value;
- Requiring notes issued to secured creditors in cramdowns bear a market rate of interest;
- Allowing for credit bidding under current standards and without restriction, and rejecting recent rulings finding the chilling effect of credit bids to be a “cause” to limit bids;
- Allowing claims trading to continue without further restrictions; and
- Clarifying when a creditor’s vote may be designated.