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Showing 1 post in Post-Petition Interest.

On the Eve of the EFH Confirmation Hearing, Bankruptcy Court Issues Opinion on Unsecured Noteholders’ Entitlement to Post-Petition Interest

In re Energy Future Holdings Corp., No. 14-10979, --- B.R. ----, 2015 WL 6660787 (Bankr. D. Del. Oct. 30, 2015)

On the eve of the multi-week confirmation hearing scheduled in the chapter 11 cases of Energy Future Holdings Corp., Judge Sontchi of Delaware’s Bankruptcy Court issued several significant decisions, one of which—analyzed here—rules on whether unsecured creditors are entitled to receive post-petition interest on their claims under four sections of the Bankruptcy Code—section 502(b)(2), section 1129(a)(7) (“Best Interests Test”), section 1129(b) (“Cramdown”), and section 1124(1) (“Unimpairment”).*  First, as a threshold matter, the Court held that an allowable portion of an unsecured claim cannot include post-petition interest under the plain language of section 502(b)(2).  Second, the Court analyzed whether payment of post-petition interest on an allowed unsecured claim is required for a chapter 11 debtor to confirm a plan of reorganization and, if so, at what rate.  In sum, the Court held that:  (1) to satisfy the Best Interests Test, an unsecured creditor must receive post-petition interest at the Federal judgment rate only if it would be entitled to such a distribution in a hypothetical chapter 7 liquidation; (2) to properly Cramdown an unsecured rejecting class, the plain language of section 1129(b)(2) does not require the payment of post-petition interest but a court may award such payment if equitable, at either the contract rate or such other appropriate rate; and finally (3) Unimpairment may occur without the payment in cash of post-petition interest at the contract rate but such determination must be made by a court on the facts of the case and pursuant to the court’s equitable power. Read More ›