ILNews

7th Circuit orders proposed plan of reorganization open to competitive bidding

Back to TopCommentsE-mailPrintBookmark and Share

The 7th Circuit Court of Appeals reversed a Southern District Bankruptcy judge Thursday, finding the judge incorrectly ruled that competition was unnecessary in a plan of reorganization involving a shopping center.

George Broadbent owns 98 percent direct equity of Castleton Plaza, the debtor, and the other 2 percent indirectly. EL-SNPR is Castleton Plaza’s only secured lender. When Castleton Plaza’s note matured with EL-SNPR, it did not pay and instead commenced bankruptcy. About a year later it proposed a plan of reorganization, under which $300,000 of EL-SNPR’s $10 million secured debt would be paid now with the balance written down to around $8.2 million and treated as unsecured. One-hundred percent of equity in the reorganized Castleton Plaza would go to Mary Clare Broadbent, George’s wife, who would invest $375,000.

George Broadbent is CEO of the Broadbent Company Inc., in which Mary Clare Broadbent owns all of the equity, and he receives a salary from the company. Broadbent and Castleton Plaza would keep their management contract.

EL-SNPR, thinking Castleton Plaza’s assets have been undervalued, asked the bankruptcy judge to condition Mary Clare Broadbent’s plan acceptance on her making the highest bid in open competition. Judge Basil Lorch III held that competition is unnecessary and confirmed the plan as proposed.

“Competition helps prevent the funneling of value from lenders to insiders, no matter who proposes the plan or when. An impaired lender who objects to any plan that leaves insiders holding equity is entitled to the benefit of competition,” Chief Judge Frank Easterbrook wrote. “If, as Castleton and the Broadbents insist, their plan offers creditors the best deal, then they will prevail in the auction. But if, as EL-SNPR believes, the bankruptcy judge has underestimated the value of Castleton’s real estate, wiped out too much of the secured claim, and set the remaining loan’s terms at below-market rates, then someone will pay more than $375,000 (perhaps a lot more) for the equity in the reorganized firm.”

The case, In the matter of: Castleton Plaza LP; Appeal of: El-SNPR Notes Holdings LLC, 12-2639, is remanded with directions to open the proposed plan of reorganization to competitive bidding.

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Oh my lordy Therapist Oniha of the winexbackspell@gmail.com I GOT Briggs BACK. Im so excited, It only took 2days for him to come home. bless divinity and bless god. i must be dreaming as i never thoughts he would be back to me after all this time. I am so much shock and just cant believe my eyes. thank you thank you thank you from the bottom of my heart,he always kiss and hug me now at all times,am so happy my heart is back to me with your help Therapist Oniha.

  2. Hail to our Constitutional Law Expert in the Executive Office! “What you’re not paying attention to is the fact that I just took an action to change the law,” Obama said.

  3. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  4. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  5. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

ADVERTISEMENT