By: Caitlin Cline
St. John's Law Student
American Bankruptcy Institute Law Review Staff
 
Drawing a distinction between Chapter 11 plans and section 363 sales, the Ninth Circuit Court of Appeals held in General Electric Capital Corp. v. Future Media Productions, Inc.[1] that when an oversecured creditor is paid off through a section 363 sale, it is entitled to enforce a default interest rate provision and is not limited to the pre-default rate.  In contrast, if payment is made through a confirmed plan, the debtor may “cure” the default under section 1124 and avoid the default interest rate.[2]

By: Thomas Scappaticci Jr.
St. John's Law Student
American Bankruptcy Institute Law Review Staff
 
The decision in Clear Channel Outdoor, Inc. v. Knupfer (In re PW)[1] cast doubt on the ability of a senior secured creditor to take title free and clear of junior liens under section 363(f) of the Bankruptcy Code.  In Clear Channel, the Ninth Circuit Bankruptcy Appellate Panel held that “[s]ection  363(f) of the Bankruptcy Code [does not] permit a secured creditor to credit bid its debt and purchase estate property, taking title free and clear of valid, non consenting junior liens.”[2]  The Court noted the split in cases interpreting the section 363(f)(3) ground for free and clear sales, but followed the more restrictive line that limits such sales to situations where the sale proceeds exceeded the face amount of all liens,[3] thus making it unavailable in cases where the junior liens are undersecured.  The Court’s interpretation section 363(f)(5) was more novel in nature, holding that a “cram down” is not a legal proceeding under that provision.[4]  The truly novel aspect of the opinion, however, was its holding that the section 363(m) statutory mootness provision applied only to the sale itself, and did not shield the section 363(f) free and clear aspect of the sale.[5]  This holding seems to allow a junior lien creditor to attack, post sale, virtually any sale that does not fully satisfy its claim.