## Facts

- LTV Steel Company, Inc., a large integrated steel manufacturer, filed Chapter 11 petitions with numerous subsidiaries on December 29, 2000; the cases were jointly administered.
- After an earlier reorganization, LTV entered an asset-backed securitization in 1994 intended to keep receivables outside any future bankruptcy estate.
- LTV formed a wholly owned special-purpose vehicle, LTV Sales Finance Company, and purported to sell accounts receivable to it on a continuing basis.
- Abbey National Treasury Services PLC financed the structure by lending approximately $270 million to the SPV and taking a security interest in the receivables and related proceeds.
- On the petition date, LTV sought emergency authority to use cash alleged to be cash collateral tied to the receivables; LTV asserted it would have to shut down without access to that cash.
- The bankruptcy court entered an interim order authorizing use of the disputed cash collateral.
- Abbey National filed an emergency motion to modify the interim order, arguing (i) the receivables were not property of the estate under 11 U.S.C. § 541 and (ii) its interest was not adequately protected as the receivables allegedly were rapidly diminishing.
- The court held a hearing on January 18, 2001 and issued a memorandum opinion on February 5, 2001.

## Issues

1. Whether receivables nominally transferred to a non-debtor SPV in an asset-backed securitization could be treated, for interim cash-collateral purposes, as “property of the estate” under 11 U.S.C. § 541 based on the debtor’s retained equitable interests.
2. Whether the secured lender was entitled to additional protections or restrictions under 11 U.S.C. §§ 361 and 363(e) because the collateral value was allegedly decreasing.
3. Whether the court should modify the interim cash-collateral order governing the debtor’s use of the disputed receivables proceeds.

## Decision

- The court denied Abbey National’s emergency motion to modify the interim cash-collateral order.
- For purposes of the interim order, the court concluded LTV retained sufficient equitable interests in the receivables and proceeds to treat them as property of the estate within the broad scope of § 541.
- The court found Abbey National’s interest adequately protected at the interim stage, including by an equity cushion and the ongoing operation of the business generating receivables.
- The court emphasized the emergency posture and left Abbey National’s rights preserved to seek later valuation, adequate-protection relief, or other modifications as the case developed.

## Legal Principles

- “Property of the estate” under 11 U.S.C. § 541 is construed broadly and can include equitable, contingent, or residual interests, not only formal legal title.
- In assessing interim use of cash collateral under 11 U.S.C. § 363, a bankruptcy court may permit use over a secured party’s objection if the secured party receives adequate protection under §§ 361 and 363(e).
- Adequate protection may be shown, in appropriate circumstances and especially at an early interim stage, through evidence of collateral value support such as an equity cushion and the preservation of value associated with continuing operations.
- A “bankruptcy-remote” securitization structure does not, by itself, conclusively preclude a finding that the debtor holds an estate interest sufficient to support interim cash-collateral relief.

## Conclusion

The court permitted continued interim use of cash collateral tied to securitized receivables, treating the debtor as holding an equitable estate interest for § 541 and § 363 purposes and finding the secured ABS lender adequately protected, while preserving the lender’s ability to seek later, more detailed protection or valuation-based relief.


In re LTV Steel Co., 274 B.R. 278 (Bankr. N.D. Ohio 2001)