## Facts

- Trans Max Technologies, Inc. was a small public company whose historical ignition-system manufacturing business was shut down after Samuel Higgins acquired control and renamed the company.
- Higgins owned about 66% of the debtor’s prepetition common stock and served as president.
- The debtor filed for Chapter 11 protection on September 8, 2005, and acted as debtor-in-possession.
- The proposed plan sought to reconstitute the debtor around Higgins’ rights in a patented vertical-takeoff-and-landing aircraft design and a proposed “flying car” venture, to be pursued mainly through joint ventures funded by outside capital.
- The plan provided for cancellation of all outstanding debt and equity securities and issuance of new common stock.
- Creditors would receive new stock in exchange for their claims; Higgins would contribute $50,000 in cash plus the aircraft design rights and receive 9,000,000 shares of new common stock, giving him dominant post-confirmation control.
- The plan assumed the reorganized debtor would incur no post-confirmation debt and would depend on unidentified outside investors to fund 100% of future capital needs.
- The United States Trustee objected to confirmation; some creditors filed written objections, and Higgins testified at the confirmation hearings.

## Issues

1. Whether the plan satisfied the feasibility requirement of 11 U.S.C. § 1129(a)(11) given its dependence on speculative technology development and uncommitted third-party financing.
2. Whether, to the extent confirmation required cramdown, the plan was “fair and equitable” under 11 U.S.C. § 1129(b), including whether it improperly conferred a disproportionate premium of control and upside on Higgins.

## Decision

- Confirmation was denied.
- The plan failed § 1129(a)(11) because the debtor did not prove a reasonably probable ability to implement the plan and avoid liquidation or further reorganization.
- The plan also failed § 1129(b)’s “fair and equitable” standard because the equity allocation effectively granted Higgins a disproportionate premium compared to what other stakeholders surrendered.

## Legal Principles

- The plan proponent bears the burden to prove each confirmation requirement under 11 U.S.C. § 1129.
- Feasibility under § 1129(a)(11) requires evidence of a workable reorganization; speculative business hopes and unsupported assumptions about future financing are insufficient.
- A plan premised on third-party funding must present concrete, reliable evidence of financing prospects (e.g., identifiable investors and meaningful commitments), not preliminary discussions or generalized expectations.
- Under § 1129(b), “fair and equitable” treatment includes the principle that a plan may not pay a premium to one constituent at the expense of another, including by granting disproportionate equity control or upside without commensurate value.
- When a plan cancels existing capital structures and reallocates ownership, the court evaluates whether contributions and distributions reasonably correspond to demonstrated value and risk allocation.

## Conclusion

The court denied confirmation because the debtor’s proposed reorganization depended on speculative commercial success and uncommitted investor funding, and because the plan’s equity distribution gave the controlling insider an unwarranted premium inconsistent with fair and equitable treatment.


In re Trans Max Techs., Inc., 349 B.R. 80 (Bankr. D. Nev. 2006)