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substitute might satisfy the requirement, but it rejected the owners' contribution of financial standing or management services because they had "no place in the asset column of the balance sheet" and simply reflected "vague hopes or possibilities." More recently, in Ahlers, the Court explained that the value offered must be tangible, alienable, enforceable, and something of value to the creditors at the time the plan is confirmed. The debtor's promise of "free" future labor does not suffice.
The contribution must be capable of being valued. It need not be cash, as a contribution of real property may suffice. But a release of an unsecured claim by an insider or affiliated party is not sufficient, even though it improves the balance sheet. Pledge of the reorganized debtor's equity is even less protection than the new value principle itself.
Under this rubric, the Seventh and Ninth Circuits also requires that the money or money's worth be contributed at the confirmation or effective date. Hence, release of a lien on property of the estate, funds contributed from a new loan obtained by the debtor, a guarantee of repayment of a loan by a third party, a promissory note from the debtor or a promise of future payments from the debtor's earnings are not sufficient.
These cases equate equity's agreement to fund shortfalls, which is not new money, both because the value is not present and not equivalent to cash, with the proffer of a promissory note by an interest holder. The latter conclusion goes too far, for a promissory note may be negotiable, have market value, or provide a source of payments for a plan. Such a note can and should be valued, albeit discounted from face amount due to risk.
Because the value must be new and not derived from property of the estate, it is practically impossible for an individual debtor to provide new value except perhaps a gift from a relative or friend. Consequently an individual debtor usually cannot satisfy the "new" value exception without a contribution from an "outside" source. Indeed, this analysis could be used to support an argument that the new value exception has no place in the reorganization of any entity that does not have going concern value in excess of liquidation value, an analysis that might apply as well to many kinds of single asset debtors, but not necessarily all of them.
