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of reorganization. The Fifth Circuit rejected a bankruptcy court's implication that a liquidating Chapter 11 plan cannot be in good faith, correctly concluding that a liquidating plan is permissible. Like the Fourth Circuit in FCX, the Fifth Circuit relied on § 1123(b)(4) as providing authority for either sale of all of the property of the estate or distribution of all or part of it to creditors. One novel approach to satisfying the Code's feasibility standard, in a single asset case, was simply to provide that if the debtor could not make its secured debt payments it would deed the property back to the secured creditor. The Seventh Circuit upheld the bankruptcy court's conclusion that this satisfies feasibility because it avoids "liquidation, or the need for further financial reorganization," but the Eighth Circuit found such a "drop dead" provision alone insufficient to establish feasibility. The Fifth Circuit agrees that feasibility is satisfied if one of various plan alternatives is feasible, even if one of them is returning the collateral to the secured creditor.
Case law holds the feasibility requirement is satisfied if "the plan offers a reasonable assurance of success. Success need not be guaranteed." One court concluded that "The purpose of section 1129(a)(11) is to prevent confirmation of visionary schemes which promise creditors and equity security holders more under a proposed plan than the debtor can possibly attain after confirmation." As implied by these standards, many courts have recognized that the feasibility test imposes a "relatively low threshold of proof," and is not a "rigorous" standard. The feasibility determination is factual. The Bankruptcy Court's factual determination will be affirmed unless clearly erroneous.
"The following factors are relevant to such a finding: (l) the adequacy of the capital structure; (2) the earning power of the business; (3) economic conditions; (4) the ability of management; (5) the probability of the continuation of the same management; and (6) any other related matter which determines the prospects of a sufficiently successful operation to enable performance of the provisions of the plan." Perhaps one of the most common feasibility arguments is the question of whether future financing, such as to make a balloon payment called for by the plan, must be presently assured. Another common feasibility argument arises from the length of the promised payout, with longer payment terms being
