River Road Hotel Partners, LLC v. Amalgamated Bank, No. 10-3597 (7th Cir. 2011)
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The debtors filed Chapter 11 petitions and the court ordered joint administration. The court rejected the debtors' proposed procedures for auctioning property, holding that the plan did not qualify for "fair and equitable" status and could not be approved over the objections of creditors. The Seventh Circuit affirmed, first holding that the matter was not moot, despite the fact that the reorganization plan is no longer before the court. When a debtor’s reorganization plan has not been approved by its secured creditors and proposes the sale of encumbered assets free and clear of liens, Section 1129(b)(2)(A) provides the exclusive means by which it can be confirmed. In this case, the proposed auctions would deny secured lenders the ability to credit bid, and lack a crucial check against undervaluation.
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