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be prepared to put on substantial evidence of the value of alternative collateral and a comparison of the risks imposed on the creditor.
Another type of shift of collateral is converting apartments to condominiums; one court found this too risky to provide indubitable equivalent. The Ninth Circuit BAP rejected a "cows for cash" indubitable equivalence argument, even though the creditor had originally been secured by cows, where the cows would be used in a startup operation in a different part of the country. A less controversial modification is simply to change some of the terms of the loan documents, such as deleting requirements for mortgage insurance and surplus cash, which one court found to satisfy indubitable equivalence. Of course such a plan provision probably also satisfies § 1129(b)(2)(A)(i) because the creditor retains its lien and receives the present value of its debt.
V. CRAM DOWN OF UNSECURED CLAIMS AND EQUITY
As with secured claims, the cram down requirements for unsecured claims are that the plan "does not discriminate unfairly, and is fair and equitable." § 1129(b)(1). Unfair discrimination has been dealt with above. The "fair and equitable" requirement refers to the absolute priority rule that Justice Douglas held in Case v. Los Angeles Lumber to be inherent in the term "fair and equitable." The Code has modified it, however, to apply only when an entire class, rather than a single creditor, rejects the plan. Section 1129(b)(2)(B) is the Code's attempt at partially codifying certain treatments of unsecured claims that satisfy the absolute priority rule.
The absolute priority rule requires that an objecting class of unsecured claims receive the full present value of their claims, or else no junior class may retain any property under the plan. § 1129(b)(2) (B).
In Armstrong, the Third Circuit clarified that the absolute priority rule applies, and is violated, when a class of impaired creditors that is not paid in full objects to a distribution to a junior class, even if that distribution allegedly derives from another, co-equal creditor class
