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Creditor objected to debtors' disclosure statement asserting that it described a plan that could not be confirmed as a matter of law. Creditor first argued that the plan proposed to illegally sell securities which it owned under a repurchase agreement entered into by the parties. Creditor also argued that even if the court found that it only a security interest in the securities, that the disclosure statement still described a plan that could not be confirmed because it proposed to sell the securities free and clear of liens without affording the creditor an opportunity to credit bid its lien.

The United States Bankruptcy Court for the District of Maryland, Keir, J., denied the objection. The court found that the first issue (ownership of the securities) involved issues of fact necessitating an evidentiary hearing at the time of confirmation. As to the second issue, the court concluded that a plan of reorganization could be confirmed over a dissenting secured creditor's objection if it met any of three alternative tests of fair and equitable treatment enumerated in 11 U.S.C. § 1129(b)(2)(A)(i)-(iii). Because debtors' plan proposed to give the creditor the indubitable equivalence of its claim under section 1129(b)(2)(A)(iii), there was no requirement that it also provide credit bid rights pursuant to 1129(b)(2)(A)(ii). The issue of whether the proposed treatment of the creditor was the indubitable equivalent of secured creditor's claim is a question of fact to be determined upon the evidence introduced at the confirmation hearing.

Duncan W. Keir