By James L. Bromley, Lisa M. Schweitzer, Sean A. O’Neal, Luka A. Barefoot, and Daniel K. Soltman (Cleary Gottlieb).
On January 25, 2018, the United States Court of Appeals of the Ninth Circuit held that section 1129(a)(10) of the Bankruptcy Code, which requires cramdown plans to have at least one impaired accepting class, applies on a “per-plan” basis, rather than a “per-debtor” basis. In re Transwest Resort Properties Inc., Case No. 16-16221 (9th Cir. Jan. 25, 2018). Under the “per-plan” rule, multiple debtors with a single plan of reorganization may cram down a plan on any creditor class with the support of only one impaired accepting class, even where the impaired accepting class has claims against a different debtor than the crammed down class that has rejected the plan. The Ninth Circuit is the first circuit court to address the “per-debtor” versus “per-plan” issue, and previous decisions were split between the Southern District of New York (adopting the “per-plan” approach) and the District of Delaware (adopting the “per-debtor” approach). Transwest will likely have a significant impact on how debtors and creditors within the Ninth Circuit and elsewhere consider their relative options prior to and during bankruptcy.
The remainder of this article will discuss the Transwest case background and the Ninth Circuit’s decision, and the expected impact of the decision, both inside and outside of the Ninth Circuit. The article is available here.
For earlier Roundtable coverage of 1129(a)(10), please see our recent post on strategic impairment in cramdowns.