## Facts

- American HomePatient, Inc., a home healthcare company with operations across multiple states, filed a voluntary Chapter 11 petition in July 2002 after substantial leveraged expansion.
- A syndicate of 24 secured lenders, including Bank of Montreal, held senior secured debt with principal of roughly $278–$290 million.
- The debtor proposed a reorganization plan that was confirmed over the secured lenders’ objections under the nonconsensual confirmation (“cramdown”) provisions of 11 U.S.C. § 1129(b).
- The bankruptcy court valued the lenders’ collateral at $250 million, leaving the lenders undersecured and entitled to (1) a secured claim up to that value and (2) an unsecured deficiency claim for the remainder.
- For the secured portion, the plan required deferred payments under a restructured note bearing interest at 6.785%, calculated as a six-year U.S. Treasury yield plus a 3.5% risk premium.
- The lenders argued the collateral value was higher and that a market-based “coerced-loan” rate of 12.16% was required to provide present value.
- The debtor sought dismissal of the appeal as equitably moot due to substantial consummation of the plan; the district court declined to dismiss and affirmed on the merits.

## Issues

1. Whether the confirmation appeal should be dismissed as equitably moot because the plan had been substantially consummated and relief would be impracticable or inequitable.
2. Whether the bankruptcy court applied a permissible method under 11 U.S.C. § 1129(b)(2)(A)(i)(II) to set a cramdown interest rate that provides secured lenders the present value of their allowed secured claim.
3. Whether the bankruptcy court clearly erred in valuing the secured lenders’ collateral at $250 million.

## Decision

- The Sixth Circuit affirmed the district court’s judgment and left the confirmed plan in place.
- The appeal was not dismissed as equitably moot because meaningful relief could be fashioned without undoing the entire reorganization.
- The 6.785% cramdown rate (Treasury plus 3.5% risk premium) satisfied the present-value requirement, and the bankruptcy court did not clearly err in rejecting the lenders’ proposed 12.16% rate.
- The $250 million collateral valuation was supported by the record and was not clearly erroneous.

## Legal Principles

- Equitable mootness is a prudential, discretionary doctrine; substantial consummation alone does not bar appellate review when effective relief remains feasible without destabilizing the reorganization.
- Under 11 U.S.C. § 1129(b)(2)(A)(i)(II), cramdown treatment of a secured claim must provide deferred payments with a present value equal to the allowed amount of the secured claim as of the plan’s effective date.
- A bankruptcy court may determine a cramdown interest rate using a risk-free baseline (such as Treasury yields) plus a risk premium tailored to case-specific factors, including the debtor’s condition, collateral, term, and plan feasibility.
- Collateral valuation in Chapter 11 is fact-intensive; appellate courts apply clear-error review and defer to the bankruptcy court’s choice among reasonable valuation approaches supported by the record.

## Conclusion

The Sixth Circuit sustained confirmation of the Chapter 11 plan, holding that the appeal was not equitably moot, that a Treasury-plus risk-premium rate could satisfy cramdown’s present-value requirement, and that the bankruptcy court’s collateral valuation was not clearly erroneous.


Bank of Montreal v. Official Comm. of Unsecured Creditors (In re Am. HomePatient, Inc.), 420 F.3d 559 (6th Cir. 2005)