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"giving up" its distribution to the junior class.353 The opinion distinguished other cases that had allowed such a "give up" by a secured creditor in the "carve out" context.354
Under the full payment alternative, the unsecured claims can be paid over time, with the length of deferral and present value computation governed by the principles discussed above with respect to secured claims. The property distributed need not be cash,355 provided the present value is proven. Therefore it is permissible to distribute stock or bonds provided their value can be shown to equal the allowed claims, or no junior class retains anything under the plan.
In addition, if the debtor is solvent, postpetition, preconfirmation interest must be paid on unsecured claims before junior classes can retain any property.356 This derives not only from the historic absolute priority rule but also from the best interests test as codified in § 1129(a)(7)(A)(ii), which essentially incorporates § 726(a)(5), as discussed above.
The paradigm for the alternative under which no class junior to unsecured creditors retains anything was probably the ordinary for-profit corporation, where the rule could be satisfied by the equity interests being distributed to the unsecured creditors. Because the purpose of the absolute priority rule is to preserve for creditors who are not being paid in full the entire going concern value or potential for future appreciation or profits, it is not sufficient for equity interest holders to argue that the equity interest they retain is of "no value."357 In Boyd, the Supreme Court made clear that control of the entity cannot be retained by the equity class even if it had no current value.358
Even in a single asset case such a reorganization can serve the owners' broader goals, even though they lose their equity interests, and preserve jobs or other value for the
353 In re Armstrong World Indus., Inc., 432 F.3d 507, 514 (3d Cir. 2005).
354 In re SPM Mfg. Corp, 984 F.2d 1305 (1st Cir. 1993); In re MCorp. Fin., Inc., 160 B.R. 941 (S.D. Tex. 1993); In re Genesis Health Ventures, Inc., 266 B.R. 591 (Bankr. D. Del. 2001).
355
Code § 1129(b)(2)(B)(i) requires only distribution of "property" equal in value to the allowed claim, as distinguished from the requirement of § 1129(b)(2)(A)(i)(II) that secured creditors who retain their liens be paid in "cash."
356 Debentureholders Protective Committee v. Continental Investment Corporation, 679 F.2d 264, 269 (lst Cir. 1982).
357
Norwest Bank Worthington v. Ahlers, 108 S. Ct. 963, 969 (1988).
74
