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requirement is stated, it may be that the new value cannot be obtained from alternate sources,447 or that the plan will not succeed without the contribution. The cases rejecting cancellation of an insider's claim as new value448 can be viewed as based on the lack of necessity, since mere improvement in the balance sheet normally will not materially aid the reorganization.
In Woodbrook, the plan jettisoned the new value and canceled existing equity if the court determined the plan did not satisfy the absolute priority rule, vesting ownership in the junior class of unsecured claims, which not coincidentally appeared to be controlled by insiders. Because the plan expressly provided for the optional abandonment of the new value, it was not "necessary" for the plan's implementation.449
The courts have not defined "successful" in this context. Plans which are not generally "fair and equitable" or just in the court's view may be susceptible to an alternative determination that the new value will not be used to further a "successful" reorganization.
The value of the retained interest must be no more than the new value.450 Analysis of
contribution from equity).
447 See In re Marston Enterprises, 13 B.R. 514, 517 (Bankr. E.D.N.Y. 1981) (new investment must be necessary); In re Jartran, Inc., 44 B.R. 331, 379 (Bankr. N.D. Ill. 1984) (necessary and most feasible source). See also Case, 308 U.S. at 121, n.15, 60 S. Ct. at 10, n.15 ("Circumstances may exist where the success of an undertaking requires that new money be furnished and where the former stockholder are the only or most feasible source of the new capital."); Potter Material Service, 781 F.2d at 102 (7th Cir. 1986) ("if the creditors challenge a plan as not 'fair and equitable' because the new capital is not necessary or the shareholder is not the most feasible source, then the court must make such a finding").
448 Sun Valley Newspapers, 171 B.R. at 77-78.
449 19 F.3d at 321.
450 See 8315 Fourth Ave. Corp., 172 B.R. at 739 ($25,000 new value less than $2 million retained interest). The court simultaneously found the negative amortization plan was not feasible, but if feasible, the equity was worth $2 million. See also Creekside Landing, 140 B.R. at 718 ("New value must be 'reasonably equivalent' to what the contributor receives in exchange."); Miami Center Associates, 144 B.R. at 942 (Bankr. S.D. Fla. 1992) ($6 million infused over three years including $2 million on confirmation did not satisfy the exception where partners retained an interest in a hotel with a present value of $18,550,000). The Miami Center opinion reflects either an interesting view of the risks of bank deposits or of investments in debtors' cramdown plans when it commented that the partners' $2 million cash payment on confirmation and commitment to advance another $4 million in order to retain an interest in property with a present value of $18.5 million subject to a 100% loan "is like putting money in the bank." In Case v. Los Angeles Lumber, Justice Douglas explained "Where that necessity exists and the old stockholders make a fresh contribution and receive in return a participation reasonably equivalent to their contribution, no objection can be made." 308 U.S. at 121, 60 S. Ct. at 10. "In view of these considerations we believe that to accord 'the creditor his full right of priority against the corporate assets' where the debtor is insolvent, the stockholder's participation must
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