(CN) – The Supreme Court agreed Monday to review how a bankruptcy court handled reorganization plans for the bankrupt creators of the InterContinental Chicago O’Hare Hotel and the Radisson Hotel at Los Angeles International Airport.
In June, the 7th Circuit rejected claims that bankruptcy court erred in denying the bid procedures
motions filed in connection with the their Chapter 11 reorganization plans by River Road Hotel Partners, River Road Expansion Partners, RadLAX Gateway Hotel and RadLAX Gateway Deck.
The River Road companies borrowed $155.5 million to build the InterContinental Chicago O’Hare Hotel in 2007 and 2008, designating Amalgamated Bank as the trustee. Several months after the hotel opened in September 2008, River Road could not get additional millions more in loans to finish building the hotel’s restaurant and pay their general contractors and suppliers.
To build the LAX hotel in 2007, the River Road companies borrowed $142 million in the same fashion. When the funds ran out in March 2009 and the companies again failed to secure more funding, construction ground to a halt.
River Road filed for Chapter 11 in August 2009, owing at least $140 million on the loans for the O’Hare hotel and $120 million for the LAX location. Each load accrued an additional million dollars every month in interest.
The following year, Amalgamated Bank objected to River Road’s proposed procedures for conducting asset sales and the bankruptcy court ruled that the plans could not be confirmed.
A three-judge panel of the 7th Circuit said the decision was correct, saying River Road could satisfy statutory requirements only by allowing Amalgamated to bid its claim in lieu of cash at the sale. But this decision conflicts with precedent set by the 3rd and 5th Circuits.
In agreeing to review that decision, the Supreme Court did not issue any comment, as is its practice.
The court plans to look at a section of the Bankruptcy Code that sets forth alternative standards for determining if a chapter 11 plan is “fair and equitable” with respect to an objecting class of secured creditors.
The question presented is: Whether a debtor may pursue a chapter 11 plan that proposes to sell assets free of liens without allowing the secured creditor to credit bid, but instead providing it with the indubitable equivalent of its claim under Section 1129(b )(2) (A)(iii) of the Bankruptcy Code.