EFTA01358966.pdf

Page 34 874 F.3d 787, *; 2017 U.S. App. LEXIS 20596, fl; Bankr. L. Rep. (CCH) P83,176; 64 Bankr. Ct. Dec. 216 deferred cash payments) whose total 'value, as of the effective date of the plan, . . . is not less than the allowed amount of such claim." 11 U.S.C. § 1325(a)(5)(B)(ii). The question became, as here, how to calculate the interest on the deferred payments such that the creditor would receive the full value of its claim. No single interest-calculation method secured a majority vote on the Court, r799J resulting in a plurality opinion endorsing the "formula" method. [HN7] The "formula" approach endorsed by the Till plurality instructs the bankruptcy court to begin with a largely risk-free interest rate, specifically, the "national prime rate . . . which reflects the financial market's estimate of the amount a commercial bank should charge a creditworthy commercial borrower to compensate for the opportunity costs of the loan, the risk of inflation, and the relatively slight risk ["23] of default." 541 U.S. at 479. The bankruptcy court should then hold a hearing to determine a proper plan-specific risk adjustment to that prime rate "at which the debtor and any creditors may present evidence." Id. Using this approach, "courts have generally approved adjustments [above the prime rate] of 1% to 3%." Id. at 480.. 8 Here. the bankruptcy court applied risk adjustments of 2.0% and 2.75%. which it added to the Treasury rate of 2.1% to arrive at interest rates of 4.1% and 4.85%. respectively. 2014 Sankt LEXIS 3926. 2014 WL 4436335. at '32. Debtors assert in their briefing that the Treasury rate dropped by approximately 0.2% between the confirmation date and the plan's effective date. which thereby further lowered their notes' interest rate. 15-1682 8r. of Appellee at 11 n.3. The Till plurality arrived at the "formula" rate after rejecting a number of alternative methods relied on by the lower courts. Significantly, it rejected methods relying on purported "market" rates of interest because those rates "must be high enough to cover factors, like lenders' transactions costs and overall profits, that are no longer relevant in the context of court-administered and court-supervised cramdown loans." 541 U.S. at 477. The plurality then identified the only factors it viewed as relevant in properly ensuring that the sum of deferred payments equals present value: (i) the time-value of money; (ii) inflation; and (iii) the risk of non-payment. Id. at 474. The plurality concluded that the "formula" or "prime-plus" method best reflects those considerations. Although Till involved a Chapter 13 petition, the plurality intimated that the "formula" method might be applicable to rate calculations made ["24] pursuant to other similarly worded Code provisions. In fact, it cited the Chapter 11 cramdown provision, 11 U.S.C. § 1129(b)(2)(A)(i)(II), among many other provisions, when it noted that "[w]e think it likely that Congress intended bankruptcy judges and trustees to follow essentially the same approach when choosing an appropriate interest rate under any of these [Code] provisions." Id. at 474 & n.10. Despite that language, however, the plurality made no conclusive statement as to whether the "formula" rate was generally required in Chapter 11 cases. And, notably, the plurality went on to state, in the opinion's much-discussed footnote 14, that the approach it felt best applied in the Chapter 13 context may not be suited to Chapter 11. Specifically, in that footnote , the Court stated that in Chapter 13 cramdowns "there is no free market of willing cramdown lenders." 541 U.S. at 476 n.14. It continued: "[i]nterestingly, the same is not true in the Chapter 11 context, as numerous lenders advertise financing for Chapter 11 debtors in possession. Thus, when picking a cramdown rate in a Chapter 11 case, it might make For internal use only For internal use only CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0046953 CONFIDENTIAL SDNY_GM_00193137 EFTA01358966