## Facts

- Pullman Construction Industries, Inc. and three wholly owned affiliates operated sheet metal and mechanical contracting businesses, including HVAC services and related manufacturing work.
- The debtors filed Chapter 11 petitions on May 1, 1987, and continued operating as debtors-in-possession in jointly administered cases.
- Wells Fargo Bank, N.A. held a first-priority security interest in essentially all debtor assets and sought modification of the automatic stay to enforce rights in its collateral.
- The debtors proposed a Fourth Amended Plan of Reorganization, which depended on projected future cash flows tied to anticipated large commercial projects.
- The parties disputed the going-concern value of the business and collateral; the debtors presented a discounted cash-flow valuation using CAPM concepts and an 18% discount rate.
- Financial information presented to the court reflected substantial insolvency (liabilities materially exceeding assets and significant negative equity).

## Issues

1. Whether the Fourth Amended Chapter 11 plan satisfied confirmation requirements under 11 U.S.C. § 1129, including feasibility and proper present-value treatment of Wells Fargo’s secured claim.
2. Whether Wells Fargo was entitled to relief from the automatic stay under 11 U.S.C. § 362(d) based on lack of adequate protection, lack of equity, and the absence of an effective reorganization in prospect.

## Decision

- The court denied confirmation of the debtors’ Fourth Amended Plan of Reorganization.
- The court granted Wells Fargo’s motion to modify the automatic stay, permitting Wells Fargo to exercise its rights against the collateral under applicable nonbankruptcy law.
- The court found the plan’s projections and assumptions about future projects too uncertain to support feasibility and to ensure the promised payment stream to the secured lender.
- The court concluded that, given the debtors’ financial condition and inability to confirm a feasible plan, Wells Fargo was not adequately protected by continuation of the stay.

## Legal Principles

- A Chapter 11 plan must be feasible under 11 U.S.C. § 1129(a)(11); plans dependent on speculative revenue projections may fail feasibility.
- In cramdown or other secured-claim treatment, a plan must provide the secured creditor the present value of its allowed secured claim, requiring a risk-appropriate rate and reliable payment assumptions.
- Under 11 U.S.C. § 362(d), stay relief may be granted for cause, including lack of adequate protection, and where the debtor lacks equity and an effective reorganization is not in prospect.
- Denial of confirmation—after repeated plan attempts—can support a finding that no effective reorganization is reasonably likely within a reasonable time, favoring stay modification for a secured creditor.

## Conclusion

The court denied confirmation because the proposed reorganization depended on optimistic and uncertain projections that did not establish feasibility or adequate present-value protection for the secured lender, and it modified the automatic stay to allow Wells Fargo to proceed against its collateral where the debtors lacked equity and no effective reorganization was shown to be forthcoming.


In re Pullman Constr. Indus., Inc., 107 B.R. 909 (Bankr. N.D. Ill. 1989)