## Facts

- Couture Hotel Corporation owned and operated two Texas hotels: a Howard Johnson in Corpus Christi and a Wyndham Garden Inn in Dallas.
- In June 2013, Ability Insurance Company loaned Couture $3.2 million secured by a first lien on the Corpus Christi hotel.
- In July 2013, Mansa Capital, LLC loaned Couture about $8.87 million to renovate the Dallas hotel, secured by a first lien on the Dallas hotel and a second lien on the Corpus Christi hotel’s personal property.
- Couture experienced financial distress; Mansa declared default and posted the Dallas hotel for foreclosure.
- Couture filed a Chapter 11 petition in October 2014 to stop the foreclosure.
- Couture’s Second Amended Plan proposed to pay creditors in Classes 2–9 in full with interest over 60 months, with varying repayment terms.
- Propel Financial Services, LLC held ad valorem tax claims that primed Ability’s and Mansa’s liens.
- The plan treated Ability’s secured claim over three years (25-year amortization) and Mansa’s secured claim over five years (30-year amortization).
- Mansa objected to confirmation, arguing it was improperly separately classified and treated less favorably than similarly situated secured creditors.
- The court held a multi-day confirmation hearing and also considered Mansa’s motion for relief from the automatic stay.

## Issues

1. Whether the plan’s separate classification and treatment of Mansa’s secured claim violated the classification rules and/or constituted unfair discrimination under 11 U.S.C. §§ 1122 and 1129(b).
2. Whether the plan was proposed in good faith and was feasible under 11 U.S.C. §§ 1129(a)(3) and 1129(a)(11), given the debtor’s projections and risk allocation.
3. If confirmation was denied, whether “cause” existed to grant relief from the automatic stay under 11 U.S.C. § 362(d) to allow Mansa to pursue foreclosure.

## Decision

- The court denied confirmation of the debtor’s Second Amended Plan of Reorganization.
- The court found serious confirmation defects, including problems tied to the plan’s treatment of Mansa and the plan’s feasibility.
- The court determined the plan relied on optimistic and insufficiently supported operating projections and therefore was not feasible.
- The court conditionally granted Mansa’s motion for relief from the automatic stay, to become effective if the debtor failed to meet court-imposed requirements and deadlines to move toward a confirmable plan.

## Legal Principles

- A Chapter 11 debtor bears the burden to prove each applicable confirmation requirement in 11 U.S.C. § 1129(a); if proceeding through cramdown, the plan must also satisfy § 1129(b), including the prohibition on unfair discrimination.
- Claim classification under 11 U.S.C. § 1122 must be justified by legitimate differences; separating a major secured creditor for materially worse terms may block confirmation when it functions to force cramdown.
- Feasibility under 11 U.S.C. § 1129(a)(11) requires credible, supported financial projections; a plan dependent on speculative performance improvements may fail feasibility.
- When confirmation fails and delay prejudices a secured creditor, “cause” may exist under 11 U.S.C. § 362(d) for stay relief; a bankruptcy court may grant stay relief conditionally to allow a limited further opportunity to propose a confirmable plan.

## Conclusion

The bankruptcy court refused to confirm Couture’s reorganization plan because the plan’s structure and projections did not satisfy Chapter 11 confirmation standards, and it protected the secured lender by granting conditional relief from the automatic stay if the debtor did not promptly cure the confirmation defects through a viable amended plan process.


In re Couture Hotel Corp., 536 B.R. 712 (Bankr. N.D. Tex. 2015)