Nos. 15-1771; 15-1682; 15-1824

In re MPM Silicones, LLC

In the

United States Court of Appeals

For the Second Circuit

________

August Term, 2016

____________________________________________________________

In the Matter of: MPM Silicones, L.L.C.

____________________________________________________________

Nos. 15-1682 (L); 15-1824 (CON) 

MOMENTIVE PERFORMANCE MATERIALS INCORPORATED, APOLLO GLOBAL 

MANAGEMENT, LLC, AD HOC COMMITTEE OF SECOND LIEN HOLDERS,

Plaintiffs-Appellees,

v. 

BOKF, NA, AS FIRST LIEN TRUSTEE, WILMINGTON TRUST, N.A., AS 1.5 LIEN 

TRUSTEE,

Defendants-Appellants.

____________________________________________________________

No. 15-1771

U.S. BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE,

Plaintiff-Appellant,

v. 
2

WILMINGTON SAVINGS FUND SOCIETY, FSB, AS SUCCESSOR INDENTURE 

TRUSTEE, MOMENTIVE PERFORMANCE MATERIALS INCORPORATED, AD HOC 

COMMITTEE OF SECOND LIEN NOTEHOLDERS, APOLLO MANAGEMENT, LLC,

AND CERTAIN OF ITS AFFILIATED FUNDS,

Defendants-Appellees.

____________________________________________________________

Appeals from the United States District Courtfor the Southern District of New 

York.Vincent L. Briccetti, Judge.

________

Submitted: November 9, 2016

Decided: October 20, 2017

________

Before: CABRANES, POOLER, and PARKER, Circuit Judges.

________

Three groups of creditors separately appeal a judgment of the United 

States District Court of the Southern District of New York (Briccetti, J.) 

affirming the confirmation of Debtors= Chapter 11 reorganization plan by the 

U.S. Bankruptcy Court (Drain, J.). The creditors argue that the plan 

improperly eliminated or reduced the value of notes they held. Debtors argue 

that the plan was properly confirmed and that these appeals should be dismissed 

as equitably moot. With one exception, we conclude that the plan confirmed 

by the bankruptcy court and affirmed by the district court comports with the 

provisions of Chapter 11. We remand so that the bankruptcy court can address 

the single deficiency we identify with the proceedings below which is the 

process for determining the proper interest rate under the cramdown provision 

of Chapter 11. We decline to dismiss these appeals as equitably moot. 

________

DOUGLAS HALLWARD-DRIEMEIER, Ropes & Gray LLP,

Washington D.C.; MARK R. SOMERSTEIN, MARK I. BANE, 

Ropes & Gray, New York, NY, for Wilmington Trust, 

National Association as Indenture Trustee for the 1.5 Lien 
3

Notes.

DANIELLE SPINELLI, JOEL MILLAR, Wilmer Cutler 

Pickering Hale and Dorr LLP, Washington, D.C.; PHILIP 

D. ANKER, ALAN E. SCHOENFELD, Wilmer Cutler 

Pickering Hale and Dorr LLP, New York, NY; MICHAEL 

J. SAGE, BRAIN E. GREER, Dechert LLP, New York, NY, 

G. ERIC BRUNSTAD, JR., Dechert LLP, Hartford, CT, for 

BOKF, NA as First Lien Trustee.

SUSHEEL KIRPALANI, Quinn Emanuel Urquhart & 

Sullivan, LLP, New York, NY; ROY T. ENGLERT, JR.,

MARK T. STANCIL, ALAN E. UNTEREINER, MATTHEW M.

MADDEN, Robbins, Russell, Englert, Orseck, Untereiner 

& Sauber LLP, Washington, D.C., for U.S. Bank National 

Association, as Indenture Trustee.

IRA S. DIZENGOFF, ABID QURESHI, BRIAN T. CARNEY,

Akin Gump Strauss Hauer & Feld LLP, New York, NY; 

PRATIK A. SHAH, JAMES E. TYSSE, Z.W. JULIUS CHEN,

Akin Gump Strauss Hauer & Feld LLP, Washington, 

D.C., for Momentive Performance Materials Inc. and 

Apollo Management, LLC, and certain of its affiliated 

funds.

JOSEPH T. BAIO, JAMES C. DUGAN, Willkie Farr & 

Gallagher LLP, New York, NY, for Momentive 

Performance Materials Inc.

DENNIS F. DUNNE, MICHAEL L. HIRSCHFELD, Milbank, 

Tweed, Hadley & McCloy LLP, New York, NY, for Ad 

Hoc Committee of Second Lien Noteholders.

SETH H. LIEBERMAN, PATRICK SIBLEY, Pryor Cashman 

LLP, New York, NY, for Wilmington Savings Fund 

Society, FSB, as Successor Indenture Trustee.
4

RONALD J. MANN, Columbia Law School, New York, 

NY, for Amici Curiae Loan Syndications and Trading 

Association, the Managed Funds Association, and the 

Securities Industry and Financial Markets Association.

________

BARRINGTON D. PARKER, Circuit Judge:

These appeals by three groups of creditors challenge various aspects of 

Appellee Momentive Performance Materials, Inc.=s (AMPM,@) substantially 

consummated plan of reorganization under Chapter 11 of the U.S. Bankruptcy 

Code.1

 With one exception, we conclude that the reorganization plan (the 

APlan@) confirmed by the bankruptcy court and affirmed by the district court 

comports with Chapter 11. We remand so that the bankruptcy court can 

address the single deficiency we identify in the proceedings below, which is the 

process for determining the proper interest rate under the cramdown provision 

of Chapter 11. 

I

 1 Momentive Performance Materials, Inc.=s AMPM,@ and with affiliated debtors, ADebtors@. 
5

MPM, a leading producer of silicone, faced serious financial problems 

after it took on significant new debt obligations beginning in the mid-2000s.2

 

See 15-1771 JA 286-88; 15-1682 JA 1605-06. 3 Following these debt 

issuances, MPM was substantially overleveraged, and ultimately filed a petition 

under Chapter 11. The four relevant classes of notes issued by MPM are as 

follows: 

Subordinated Notes. In 2006, MPM issued $500 million in 

subordinated unsecured notes (the ASubordinated Notes@) pursuant to an 

indenture (the A2006 Indenture@). 15-1771 JA 303. Appellant U.S. Bank is 

the indenture trustee for the Subordinated Notes. In 2009 MPM issued secured 

second-lien notes and offered the Subordinated Notes holders the option of 

exchanging their notes for the newly-issued second-lien notes. The 

second-lien notes were offered at a 60% discount but were secured. 15-1771 

JA 2241. Holders of $118 million of the Subordinated Notes accepted the 

offer, leaving $382 million in unsecured Subordinated Notes outstanding. 

15-1771 JA 2241. 

Second-Lien Notes. In 2010, MPM issued approximately $1 billion 

in Aspringing@ second-lien notes (the ASecond-Lien Notes@). 15-1682 JA 1616; 

15-1771 JA 476. The Second-Lien Notes were to be unsecured until the $118 

million of previously exchanged Subordinated Notes were redeemed, at which 

point the Aspring@ in the lien would be triggered. 15-1771 JA 517, 580-81. 

Once triggered, the Second-Lien Notes would then (but only then) obtain a 

security interest in the Debtor=s collateral. The exchanged Subordinated Notes 

were redeemed in November 2012, 15-1771 JA 721, at which point the trigger 

 2 The facts recounted herein derive principally from the bankruptcy court=s decision 

confirming Debtors= reorganization plan, In re MPM Silicones, LLC, 2014 WL 4436335 

(Bankr. S.D.N.Y. Sept. 9, 2014), aff=d 531 B.R. 321 (S.D.N.Y. 2015), as well as the public 

disclosures made part of the record. We rely on the facts recounted in the bankruptcy 

court=s ruling in light of our Aoblig[ation] to accept the bankruptcy court=s undisturbed 

findings of fact unless they are clearly erroneous.@ Brunner v. New York State Higher Educ. 

Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987).

3 As discussed, infra note 4, we resolve with this opinion three separate appeals. Our 

citations to the respective records will begin with the relevant docket number on appeal, 

and references to AJA@ are to the respective joint appendices filed with that appeal. For 

example, our citation to A15-1771 JA 286-88" is to pages 286-88 of the joint appendix filed in 

the appeal brought by U.S. Bank, docketed No. 15-1771.
6

occurred and the Second-Lien Notes became secured with second-priority liens 

junior to other pre-existing liens on the Debtors= collateral. A primary issue on 

this appeal is whether the Second-Lien Notes have priority over the 

Subordinated Notes . 

Senior-Lien Notes. In 2012, MPM again issued more debt, this time in 

the form of two classes of senior secured notes. Specifically, MPM issued 

$1.1 billion in first-lien secured notes (the AFirst-Lien Notes@), and $250 million 

in 1.5-lien secured notes (the A1.5-Lien Notes,@ and, with the First-Lien Notes, 

the ASenior-Lien Notes@). 15-1682 JA 1615. Appellants BOKF and 

Wilmington Trust are the indenture trustees for the First-Lien Notes and 

1.5-Lien Notes, respectively. Pursuant to the governing indentures (the A2012 

Indentures@), the Senior-Lien Notes were to be repaid in full by their maturity 

date of October 15, 2020. They carried fixed interest rates of 8.875% and 10%, 

respectively. The 2012 Indentures also called for the recovery of a 

Amake-whole@ premium if MPM opted to redeem the notes prior to maturity. 

Because the Second-Lien Notes and the Senior-Lien Notes are secured by the 

same collateral, the holders of those notes executed an intercreditor agreement 

(the AIntercreditor Agreement@), which provided that the Senior-Lien Notes 

stood in priority to the Second-Lien Notes as to their respective liens, but that 

each was junior to pre-existing liens on MPM=s collateral. 15-1771 JA 

691-718. Other primary issues on this appeal are whether the Senior-Lien 

Note holders are entitled to the make-whole adjustment and the cramdown 

interest rate they are entitled to if their Notes are replaced under the Plan.

II

After these notes were issued, MPM experienced significant financial 

problems. See 15-1771 JA 284-88. In April 2014, MPM filed a petition 

under Chapter 11 and ultimately submitted a reorganization plan to the 

bankruptcy court. 15-1682 JA 3841-912. Several elements of that Plan are 

at issue on these appeals. The Plan provided for (i) a 100% cash recovery of 

the principal balance and accrued interest on the Senior-Lien Notes; (ii) an 

estimated 12.8%-28.1% recovery on the Second-Lien Notes in the form of 

equity in the reorganized Debtors; but (iii) no recovery on the Subordinated 

Notes. 15-1771 JA 271-74. 

The Plan also gave the Senior-Lien Notes holders the option of (i) 

accepting the Plan and immediately receiving a cash payment of the outstanding 
7

principal and interest due on their Notes (without a make-whole premium), or 

(ii) rejecting the Plan, receiving replacement notes Awith a present value equal 

to the Allowed amount of such holder=s [claim],@ and then litigating in the 

bankruptcy court issues including whether they were entitled to the make-whole 

premium and the interest rate on the replacement notes. 15-1771 JA 271-72; 

15-1682 JA 3873-75. The Senior-Lien Notes holders rejected the Plan, and, 

thus, elected the latter option.

The appellants hereCthe Subordinated Notes holders and the 

Senior-Lien Notes holdersCopposed the Plan. (The Second-Lien Notes 

holders unanimously accepted it.) The Subordinated Notes holders, who were 

to receive nothing, contended that, under relevant indenture provisions, their 

Notes were not subordinate to the Second-Lien Notes holders and, 

consequently, they were entitled to some recovery. The Senior-Lien Notes 

holders opposed the Plan on the ground that the replacement notes they received 

did not provide for the make-whole premium, and carried a largely risk-free 

interest rate that failed to comply with the Code because it was well below 

ascertainable market rates for similar debt obligations and thus was not fair and 

equitable because it failed to give them the present value of their claim. 

Despite these objections, the bankruptcy court confirmed the Plan 

following a four-day hearing. In re MPM Silicones, LLC, 2014 WL 4436335 

(Bankr. S.D.N.Y. Sept. 9, 2014), aff=d, 531 B.R. 321 (S.D.N.Y. 2015). 

Confirmation was facilitated by Chapter 11's Acramdown@ provision, which 

allows a bankruptcy court to confirm a reorganization plan notwithstanding 

non-accepting classes if the plan Adoes not discriminate unfairly, and is fair and 

equitable, with respect to each class of claims or interests that is impaired under, 

and has not accepted, the plan.@ 11 U.S.C. ' 1129(b)(1).

The bankruptcy court concluded that the Plan was fair to the 

Subordinated Notes holders, despite no recovery, because the 2006 Indenture 

called for their subordination to the Second-Lien Notes. In re MPM Silicones, 

LLC, 2014 WL 4436335, at *2-*11. It held the plan was fair to the 

Senior-Lien Notes holders because the 2012 Indentures did not require payment 

of the make-whole premium in the bankruptcy context and because the interest 

rate on the proposed replacement notes, even though well below a Amarket@

rate, was determined by a formula that complied with the Code=s cramdown 

provision. Id. at *11-*32. 
8

The bankruptcy court=s confirmation order triggered an automatic 14-day 

stay during which Debtors could not consummate the 

Plan. See Fed. R. Bankr. P. 3020(e). Appellants aggressively took advantage 

of this period and attempted to block the implementation of the Plan. 

Specifically, prior to the expiration of the automatic stay, appellants moved in 

the bankruptcy court to extend the stay pending their appeal of the confirmation 

order, which the court denied. See 15-1682 JA 4099, 4173. They then 

promptly moved the district court for a stay, which was also denied. See

15-1682 JA 183, 185. Appellants then appealed the denial of the stay to this 

Court, and we dismissed the appeal for lack of jurisdiction. 15-1682 JA 

4872-73. Despite these efforts, the Debtors contend this appeal is equitably 

moot, a contention with which we do not agree. 

The appellants appealed the confirmation order to the district court 

which affirmed the bankruptcy court=s confirmation order. 531 B.R. 321. 

The district court essentially agreed with the bankruptcy court, concluding that: 

(i) the relevant indentures unambiguously prioritize the Second-Lien Notes over 

the Subordinated Notes, id. at 326B31; (ii) the below market interest rate 

selected by the bankruptcy court complied with the Code, id. at 331B34; and 

(iii) under their indentures, the Senior-Lien Notes holders are not entitled to the 

make-whole premium in the context of a bankruptcy, id. at 335B38. The 

Subordinated Notes holders, the First-Lien Notes holders, and the 1.5-Lien 

Notes holders separately appealed.4

 4 The appeals by the First-Lien Notes holders (No. 15-1682) and 1.5-Lien Notes holders 

(No. 15-1824) were consolidated and heard in tandem with the appeal by the 

Subordinated Notes holders (No. 15-1771).
9

III 

AWe exercise plenary review over a district court=s affirmance of a 

bankruptcy court=s decisions, reviewing de novo the bankruptcy court=s 

conclusions of law, and reviewing its findings of facts for clear error.@ In re 

Lehman Bros., Inc., 808 F.3d 942, 946 (2d Cir. 2015) (internal quotation marks 

omitted).

IV 

These appeals raise four issues. First, the Subordinated Notes 

holders challenge the lower courts= conclusions that their claims are subordinate 

to the Second-Lien Notes holders= claims. Second, the Senior-Lien Notes 

holders contend that the lower courts erroneously applied a below-market 

interest rate to their replacement notes. Third, the Senior-Lien Notes holders 

challenge the lower courts= rulings that they are not entitled to a make-whole 

premium. Finally, Debtors argue that we should dismiss these appeals as 

equitably moot. We find merit only in the Senior-Lien Notes holders=

contention with respect to the method of calculating the appropriate interest rate 

for the replacement notes. We reject the others. 

A

The lower courts concluded that the Plan, which provided no distribution 

to the Subordinated Notes holders, complied with the governing 2006 Indenture. 

The Subordinated Notes holders argue this conclusion was erroneous because, 

under the terms of the 2006 Indenture, their claims are not subordinate to the 

Second-Lien Notes, whose holders recovered under the plan. The Debtors, on 

the other hand, contend that the 2006 Indenture gives the Second-Lien Notes 

priority over the Subordinated Notes. We agree with the Debtors, although for 

somewhat different reasons from the lower courts which found the relevant 

indenture provisions unambiguous. We find them to be ambiguous, but resolve 

the ambiguities in favor of the Debtors. 

The Subordinated Notes holders= argument begins with Section 10.01 of 

the 2006 Indenture, which states that the Subordinated Notes are Asubordinated 

in right of payment . . . to the prior payment in full of all existing and future 
10

Senior Indebtedness of the Company,@ and that Aonly Indebtedness of the 

Company that is Senior Indebtedness of the Company shall rank senior to the 

Securities in accordance with the provisions set forth herein.@ 15-1771 JA 404. 

Accordingly, the Second-Lien Notes stand in priority to the Subordinated Notes 

only if they constitute ASenior Indebtedness.@

ASenior Indebtedness@ in the 2006 Indenture begins with what the parties 

refer to as the ABaseline Definition,@ which defines Senior Indebtedness as:

all Indebtedness . . . unless the instrument creating or 

evidencing the same or pursuant to which the same is 

outstanding expressly provides that such obligations are 

subordinated in right of payment to any other Indebtedness of 

the Company . . .

15-1771 JA 341.

It is undisputed that the Second-Lien Notes are not subordinated in right 

of payment to any other indebtedness and that therefore they satisfy the 

Baseline Definition of Senior Indebtedness. However, the Baseline Definition 

is then subject to six enumerated exceptions, the fourth of which (the AFourth 

Proviso@) excepts from Senior Indebtedness:

any Indebtedness or obligation of the Company . . . that by its 

terms is subordinate or junior in any respect to any other 

Indebtedness or obligation of the Company . . . including any 

Pari Passu Indebtedness.

15-1771 JA 342 (emphasis added). 

The Subordinated Notes holders argue that the Fourth Proviso carves out 

the Second-Lien Notes from the Baseline Definition, i.e., that the Second-Lien 

Notes are an A[i]ndebtedness or obligation of the Company . . . that by its terms 

is subordinate or junior in any respect to any other Indebtedness of the 

Company.@ The Subordinated Notes holders rely heavily on the Ain any respect@

language. They argue that the Second-Lien Notes are subordinate to, for 

example, the First-Lien NotesCbecause, pursuant to the Intercreditor 

Agreement, the liens supporting the Second-Lien Notes are junior to the liens 
11

supporting the First-Lien NotesCand that they are therefore subordinate to other 

Indebtedness of the company.

The lower courts rejected this argument, and concluded that the 

Second-Lien Notes unambiguously constitute Senior Indebtedness despite the 

Fourth Proviso. They did so in reliance on a distinction between Alien 

subordination@ and Apayment (or debt) subordination,@ concluding that the 

Fourth Proviso unambiguously carves out from the Baseline Definition only the 

latter and not the former.5

 Because the Second-Lien Notes are not subordinate 

in payment to other note classesCbut rather, the liens supporting their notes are 

subordinateCthe lower courts concluded that the Second-Lien Notes are not 

covered by the Fourth Proviso.

 5 The district court discussed in some detail the distinction between lien subordination 

and payment/debt subordination. 531 B.R. at 328. In short, A[l]ien subordination 

involves two senior creditors with security interests in the same collateral, one of which 

has lien priority over the other. . . . By contrast, in payment subordination, the senior 

lender enjoys the right to be paid first from all assets of the borrower or any applicable 

guarantor, whether or not constituting collateral security for the senior or subordinated 

lenders.@ Id.
12

We do not agree with the lower courts that the Fourth Proviso 

unambiguously incorporates a distinction between lien subordination and 

payment subordination. Rather, we conclude that the Fourth Proviso renders 

the definition of Senior Indebtedness ambiguous as to whether it includes the 

Second-Lien Notes. Nevertheless, we conclude that this ambiguity should be 

resolved in Debtors= favor given the plethora of evidence in the record that the 

parties intended the Second-Lien Notes to be Senior Indebtedness. 

1

As discussed, the lower courts concluded that the Second-Lien Notes are 

unambiguously Senior Indebtedness. Under New York law, which governs 

the Indenture, a fundamental objective of contract interpretation is to give effect 

to the expressed intention of the parties. The initial inquiry is whether the 

contractual language, without reference to sources outside the text of the 

contract, is ambiguous. Contract language is ambiguous if it is capable of 

more than one meaning. 

We are not persuaded by the Debtors= (and lower courts=) conclusion that 

the Fourth Proviso=s reference to Asubordinate . . . in any respect@

unambiguously refers only to payment subordination and not to lien 

subordination. The Debtors read the Fourth Proviso as if it states Asubordinate 

. . . in right of payment,@ which of course it does not. In so doing, the Debtors 

disregard the breadth of the term Ain any respect,@ a term which is generally 

thought to be as broadly encompassing as possible. 6

 And, as a practical 

matter, it seems to us illogical to believe that a second-lien holder does not 

possess an obligation that is meaningfully subordinate in some respect to a 

first-lien holder. These sophisticated parties knew how to cabin the type of 

subordination to which they refer; the indenture uses the term Asubordinate . . . 

in right of payment@ many times, including in the Baseline Definition itself. 

 6 Debtors= attempt to downplay the significance of the term Ain any respect@ in this 

context is unconvincing given that the term appears nowhere else in the indenture other 

than in the Fourth Proviso.
13

Moreover, the Debtors= interpretation renders language in the indenture 

superfluous, which is a common sign of ambiguity. See RJE Corp. v. 

Northville Indus. Corp., 329 F.3d 310, 314 (2d Cir. 2003) (in assessing 

ambiguity, courts consider the entire contract Ato safeguard against adopting an 

interpretation that would render any individual provision superfluous@ (internal 

quotation marks omitted)); see also Lawyers= Fund for Client Protection of State 

of N.Y. v. Bank Leumi Trust Co. of New York, 94 N.Y.2d 398, 404 (N.Y. 

2000) (concluding that an interpretation that renders a portion of a contract 

superfluous is Aunsupportable: under standard principles of contract 

interpretation). Specifically, if the Fourth Proviso only excepts debt 

subordinate in right of payment, there is no purpose for the Ain right of 

payment@ carve-out in the Baseline Definition. We disagree with the lower 

courts= attempts to interpret away this superfluity by finding a distinction 

between Aexpressly@ (in the Baseline Definition) and Aby its terms@ (in the 

Fourth Proviso). We see no meaningful distinction between those terms.

Nevertheless, we also conclude that the Subordinated Notes holders=

interpretation, that the Fourth Proviso unambiguously excludes the Second-Line 

Notes from the definition of Senior Indebtedness, is incorrect. As the lower 

courts correctly concluded, the Subordinated Notes holders= interpretation 

renders key parts of the Baseline Definition superfluous. Under their reading, 

that definition excludes from Senior Indebtedness only obligations subordinate 

Ain right of payment,@ but the Fourth Proviso excludes all obligations that stand 

behind any type of other obligation. If so, the Baseline Definition=s more 

limited carve-out for debt subordinate Ain right of payment@ would be 

unnecessary, because all such debt would be carved out from the definition of 

Senior Indebtedness by the Fourth Proviso. 

As the Subordinated Notes holders correctly acknowledge, A[f]or this 

indenture, it simply is not possible to avoid superfluity.@ 15-1771 Br. of 

Appellant 54 (internal quotation marks omitted). Where, as here, varying 

interpretations render contractual language superfluous, we are not obligated to 

arbitrarily select one as opposed to another. Because the 2006 Indenture is 
14

open to differing reasonable interpretations as to whether the Second-Lien 

Notes constitute Senior Indebtedness, we conclude that it is ambiguous as a 

matter of law.

 

2

Where a contract term is ambiguous, we look to extrinsic evidence to 

determine the intention of the parties. That evidence can include the parties=

apparent intention, Walk-In Medical Centers, Inc. v. Breuer Capital Corp., 818 

F.2d 260, 264 (2d Cir. 1987), what would be commercially reasonable, 

Fundamental Long Term Care Holdings, LLC v. Cammeby=s Funding LLC, 20 

N.Y.3d 438, 445 (2013), and the Aparties= interpretation of the contract in 

practice, prior to litigation,@ Ocean Transp., Inc. v. American Philippine Fiber 

Indus., Inc., 743 F.2d 85, 91 (2d Cir. 1984). Applying these tools, we 

conclude, as did the district court, that the parties understood that the 

Second-Lien Notes constituted Senior Indebtedness. See 531 B.R at 331 n.7. 

First, MPM repeatedly represented to the Securities Exchange 

Commission and to the financial community that the Second-Lien Notes were 

Senior Indebtedness. It did so in its prospectuses, 8-Ks and 10-Ks. For 

example, it disclosed in a November 2010 8-K that the Second-Lien Notes are 

Asenior indebtedness of the Company . . . and will rank . . . senior in right of 

payment to all existing and future subordinated indebtedness.@ 15-1771 JA 

3057; see also 15-1771 JA 2231. It went further when it subsequently resold 

certain Subordinated Notes. In a May 2013 prospectus, MPM restated that the 

Subordinated Notes Aare subordinated to all our existing and future senior debt, 

including the . . . Second-Priority Springing-Lien Notes.@ MPM also 

specifically identified as the first risk related to the Subordinated Notes that 

those holders= Aright to receive payments on the Notes is junior to those lenders 

who have a security interest in our assets.@ 15-1771 JA 3007, 3010. MPM 

further asserted that in the event it were to file for bankruptcy and were unable 

to repay its secured debt, Ait is possible that there would be no assets remaining 

from which your claims could be satisfied.@ 15-1771 JA 3010. The 
15

Subordinated Note holders knew all of this because the Debtors were 

contractually obligated, pursuant to Section 4.02 of the 2006 Indenture, to 

provide copies of its 10-Ks, 10-Qs, 8-Ks, and all other required disclosures both 

to the Subordinated Note holders as well as to their TrusteeCa highly 

sophisticated group of investors. 15-1771 JA 357. There is no dispute that 

these disclosures occurred. Consequently, it was widely understood in the 

investment community that the Second-Lien Notes had priority. 

Second, the Subordinated Notes holders= interpretation generates the 

irrational outcome that the springing of the Second-Lien Notes= security interest, 

which was meant to enhance the note holders= protection, would actually strip 

those notes of their status as Senior Indebtedness and therefore their priority 

over the Subordinated Notes. As the bankruptcy court concluded, A[t]here is no 

logical reason for such a distinction, notwithstanding the subordinated 

noteholders= attempt to find one.@ 2014 WL 4436335, at *9. 

Third, the Subordinated Notes holders= proposed interpretation that Ain 

any respect@ covers all junior liens would mean that no senior note classes would 

qualify as Senior Indebtedness because each was secured in some respect by a 

junior lien. For example, the First-Lien Notes were secured in part by a second 

priority lien on collateral securing a prepetition revolving credit facility. See 

15-1771 JA 2425-26. We think it highly improbable that anyone understood 

this interpretation to be correct. Certainly MPM did not. For example, in a 

December 2012 prospectus MPM represented to the SEC that the Senior-Lien 

Notes were Senior Indebtedness. 15-1771 JA 3725. Because those note 

classes are subordinate to pre-existing liens as to the Debtors= collateral, they, 

too, would seemingly not qualify as Senior Indebtedness under the Subordinated 

Notes holders= interpretation. In light of these factors, we have little trouble 

concluding that the extrinsic evidence establishes that the most reasonable 

interpretation of the Indenture is that the Second-Lien Notes are Senior 

Indebtedness. The judgment of the district court on that issue is, therefore, 

affirmed.
16

B 

As a consequence of rejecting the Plan, the Senior-Lien Notes holders 

received replacement notes which pay out their claim over time. The Code 

permits debtors to make such Adeferred cash payments@ to secured creditors (i.e., 

to Acramdown@). 11 U.S.C. ' 1129(b)(2)(A)(i)(II). However, those payments 

must ultimately amount to the full value of the secured creditors= claims. Id. 

To ensure the creditor receives the full present value of its secured claim, the 

deferred payments must carry an appropriate rate of interest. See Rake v. 

Wade, 508 U.S. 464, 472 n.8 (1993). 

The rate selected by the lower courts for the Senior-Lien Note holders=

replacement notes was based on the Aformula@ rate. The bankruptcy court 

selected interest rates of 4.1% and 4.85%, respectively, which were largely 

risk-free rates slightly adjusted for appropriate risk factors. It is not disputed 

that this rate is below market in comparison with rates associated with 

comparable debt obligations. The Debtors defend the application of the 

Aformula@ method on the ground that it is required by the plurality opinion in the 

Chapter 13 case of Till v. SCS Credit Corp., 541 U.S. 465 (2004). 

The Senior-Lien Notes holders contend that because this rate is too low, 

the Plan is not Afair and equitable@ as required by ' 1129(b). They argue that 

the lower courts should have applied a market rate of interest which is the rate 

MPM would pay to a contemporaneous sophisticated arms-length lender in the 

open market. The Senior-Lien Notes holders argued in the bankruptcy court 

that such a market exists and would generate interest in the 5-6+% range. See

15-1682 JA 464, 1941.7

 7 Debtors= reorganization plan proposed interest rates of 3.6% and 4.09%. See 2014 WL 

4436335, at *24. However, the bankruptcy court concluded that those rates should be 

increased by 0.5% and 0.75%, respectively, in light of the fact that the base interest rate 

was pegged to the Treasury rate, rather than the prime rate (which reflects additional 

risk). Id. at *32. On appeal to the district court, the Senior-Lien Notes holders argued 

the bankruptcy court erred in not requiring the prime rate, an argument the district court 

rejected. 531 B.R. at 334-35. The Senior-Lien Notes holders do not press this argument 

here.
17

The bankruptcy court rejected this approach, and concluded that a 

cramdown interest rate should Anot take market factors into account.@ 2014 WL 

4436335, at *25. Viewing itself as Alargely governed by the principles 

enunciated by the plurality opinion in Till v. SCS Credit Corp., 541 U.S. 465 

(2004),@ it concluded that the proper rate was what the plurality in Till referred 

to as the Aformula@ or Aprime-plus@ rate (discussed more fully below). Id. at 

*24, *26. The district court agreed. 531 B.R. at 332B34. The Senior-Lien 

Notes holders argue on appeal that the lower courts erred in concluding that the 

Till plurality opinion is wholly applicable to this Chapter 11 proceeding. In 

substantial part, we agree. 

At issue in Till was a Chapter 13 debtor=s sub-prime auto loan, carrying 

an interest rate of 21% and providing the creditor with a $4,000 secured claim. 

As with Chapter 11, Chapter 13 allows debtors to provide secured creditors with 

future property distributions (such as deferred cash payments) whose total >value, 

as of the effective date of the plan, . . . is not less than the allowed amount of 

such claim.@ 11 U.S.C. ' 1325(a)(5)(B)(ii). The question became, as here, 

how to calculate the interest on the deferred payments such that the creditor 

would receive the full value of its claim. No single interest-calculation method 

secured a majority vote on the Court, resulting in a plurality opinion endorsing 

the Aformula@ method. 

The Aformula@ approach endorsed by the Till plurality instructs the 

bankruptcy court to begin with a largely risk-free interest rate, specifically, the 

Anational prime rate . . . which reflects the financial market=s estimate of the 

amount a commercial bank should charge a creditworthy commercial borrower 

to compensate for the opportunity costs of the loan, the risk of inflation, and the 

relatively slight risk of default.@ 541 U.S. at 479. The bankruptcy court 

should then hold a hearing to determine a proper plan-specific risk adjustment to 

that prime rate Aat which the debtor and any creditors may present evidence.@ 

Id. Using this approach, Acourts have generally approved adjustments [above 
18

the prime rate] of 1% to 3%.@ Id. at 480.8

The Till plurality arrived at the Aformula@ rate after rejecting a number of 

alternative methods relied on by the lower courts. Significantly, it rejected 

methods relying on purported Amarket@ rates of interest because those rates Amust 

be high enough to cover factors, like lenders= transactions costs and overall 

profits, that are no longer relevant in the context of court-administered and 

court-supervised cramdown loans.@ 541 U.S. at 477. The plurality then 

identified the only factors it viewed as relevant in properly ensuring that the sum 

of deferred payments equals present value: (i) the time-value of money; (ii) 

inflation; and (iii) the risk of non-payment. Id. at 474. The plurality 

concluded that the Aformula@ or Aprime-plus@ method best reflects those 

considerations. 

Although Till involved a Chapter 13 petition, the plurality intimated that 

the Aformula@ method might be applicable to rate calculations made pursuant to 

other similarly worded Code provisions. In fact, it cited the Chapter 11 

cramdown provision, 11 U.S.C. ' 1129(b)(2)(A)(i)(II), among many other 

provisions, when it noted that A[w]e think it likely that Congress intended 

bankruptcy judges and trustees to follow essentially the same approach when 

choosing an appropriate interest rate under any of these [Code] provisions.@ Id. 

at 474 & n.10.

 8 Here, the bankruptcy court applied risk adjustments of 2.0% and 2.75%, which it added 

to the Treasury rate of 2.1% to arrive at interest rates of 4.1% and 4.85%, respectively. 

2014 WL 4436335, at *32. Debtors assert in their briefing that the Treasury rate dropped 

by approximately 0.2% between the confirmation date and the plan=s effective date, which 

thereby further lowered their notes= interest rate. 15-1682 Br. of Appellee at 11 n.3.
19

Despite that language, however, the plurality made no conclusive 

statement as to whether the Aformula@ rate was generally required in Chapter 11 

cases. And, notably, the plurality went on to state, in the opinion=s 

much-discussed footnote 14, that the approach it felt best applied in the Chapter 

13 context may not be suited to Chapter 11. Specifically, in that footnote , the 

Court stated that in Chapter 13 cramdowns Athere is no free market of willing 

cramdown lenders.@ 541 U.S. at 476 n.14. It continued: A[i]nterestingly, the 

same is not true in the Chapter 11 context, as numerous lenders advertise 

financing for Chapter 11 debtors in possession. Thus, when picking a 

cramdown rate in a Chapter 11 case, it might make sense to ask what rate an 

efficient market would produce.@ Id. (internal citations omitted) (emphasis in 

original).9

 

Many courts have relied on footnote 14 to conclude that efficient market 

rates for cramdown loans cannot be ignored in Chapter 11 cases. Most notably, 

the Sixth Circuit, Atak[ing] [its] cue from Footnote 14@ of the Till plurality, 

adopted a two-part process for selecting an interest rate in Chapter 11 

cramdowns: 

[T]he market rate should be applied in Chapter 11 cases where 

there exists an efficient market. But where no efficient market 

exists for a Chapter 11 debtor, then the bankruptcy court should 

employ the formula approach endorsed by the Till plurality. 

 9 The Supreme Court has not subsequently spoken about the interest-calculation method 

to be applied in a Chapter 11 case. Nor have we.
20

In re American HomePatient, Inc., 420 F.3d 559, 568 (6th Cir. 2005). In 

applying this rule, courts have held that markets for financing are >efficient=

where, for example, Athey offer a loan with a term, size, and collateral

comparable to the forced loan contemplated under the cramdown plan.@ In re 

Texas Grand Prairie Hotel Realty, L.L.C., 710 F.3d 324, 337 (5th Cir. 2013).10 

We adopt the Sixth Circuit=s two-step approach, which, in our view, best 

aligns with the Code and relevant precedent. We do not read the Till plurality 

as stating that efficient market rates are irrelevant in determining value in the 

Chapter 11 cramdown context. And, disregarding available efficient market 

rates would be a major departure from long-standing precedent dictating that Athe 

best way to determine value is exposure to a market.@ Bank of Am. Nat=l Trust 

and Sav. Ass=n v. 203 N. LaSalle St. P=ship, 526 U.S. 434, 457 (1999) (assessing 

a Chapter 11 cramdown); see also United States v. 50 Acres of Land, 469 U.S. 

24, 25 & n.1 (1984) (Afair market value@ is Awhat a willing buyer would pay in 

cash to a willing seller@ (internal quotation marks omitted)). In Bank of 

America, the Court noted that Aone of the Code=s innovations [was] to narrow the 

occasions for courts to make valuation judgments,@ and expressed a Adisfavor for

decisions untested by competitive choice . . . when some form of market 

valuation may be available.@ Bank of America, 526 U.S. at 457-58.

 10 Numerous courts, included in this Circuit, have followed the American HomePatient

approach. See, e.g., In re 20 Bayard Views, LLC, 445 B.R. 83, 108-09 (E.D.N.Y. 2011) 

(collecting cases and deciding to Afollow the majority approach@ first outlined in American 

HomePatient). 
21

The Senior-Lien Notes holders presented expert testimony in the 

bankruptcy court that, if credited, would have established a market rate. This 

evidence showed that if the Senior-Lien Noteholders were to have approved the 

Plan and accepted a cash-out payment for their notes, MPM would have had to 

secure exit financing to cover the lump-sum payment. In preparation for that 

possible eventuality (which did not come to pass in light of the Senior-Lien 

Notes holders= rejection of the Plan), MPM went out into the market seeking 

lenders to provide that financing. Those lenders quoted MPM rates of interest 

ranging between 5 and 6+%. See In re MPM Silicones, LLC, 2014 WL 

4436335, at *29.

At these rates, the First-Lien Note holders contend that they would have 

received around $150 million more than the Plan offered, Br. of First-Lien 

Appellant 25, 33. The 1.5-Lien Note holders claim that the interest rate chosen 

by the lower courts led them to receive notes Avalued by the market at less than 

93 cents on the value of the secured claims,@ Br. of 1.5-Lien Appellant 20.11

 

The Plan was objectionable to the Senior-Lien Notes holders because, in essence, 

it required them to lend Debtors a significant sum of money and receive a much 

lower rate of interest than any other lender would have received for offering the 

same loan to MPM on the open market.

When dealing with a sub-prime loan in the Chapter 13 context, Avalue@

can be elusive because the market is not necessarily efficient and the borrower is 

typically unsophisticated. However, where, as here, an efficient market may 

exist that generates an interest rate that is apparently acceptable to sophisticated 

parties dealing at arms-length, we conclude, consistent with footnote 14, that 

such a rate is preferable to a formula improvised by a court. See Bank of 

America, 526 U.S. at 457; see also In re Valenti, 105 F.3d at 63 (the goal of the 

cramdown rate Ais to put the creditor in the same economic position that it would 

 11 The Senior-Lien Notes holders offered evidence that the market price for their notes 

dropped, respectively, from 101.375% and 104.000% six days prior to the bankruptcy 

court=s oral decision, to 94.375% and 92.563% nine days after that decision. 15-1682 JA 

3991 && 5-6, 8-9. 
22

have been in had it received the value of its allowed claim immediately@); see 

also 15-1682 JA 3428 (First-Lien Notes holders= expert testifying that because 

the First-Lien Notes holders Aare pricing it at the market . . . they=re being 

compensated for the underlying risk that they are taking,@ and not for any 

Aimbedded profit@). 

We understand that the complexity of the task of determining an 

appropriate market rate will vary from case to case. In some cases the task will 

be straightforward, in others it will be more complex. But, at the end of the 

day, we have no reason to believe the task varies materially in difficulty from the 

myriad tasks which we regularly rely on the expertise of our bankruptcy courts to 

resolve.

We therefore conclude that the lower courts erred in categorically 

dismissing the probative value of market rates of interest. We remand so that 

the bankruptcy court can ascertain if an efficient market rate exists and, if so, 

apply that rate, instead of the formula rate.12

 We arrive at no conclusion with 

regard to the outcome of this inquiry. 

C 

 12 We acknowledge that the lower courts grappled with the Senior-Lien Notes holders=

evidence regarding MPM=s quoted exit financing, and made express their view that the 

rate produced by that process may not in fact have been produced by an efficient market. 

2014 WL 4436335, at *26, *29; 531 B.R. at 334 n.9. Nevertheless, Judge Drain left no 

ambiguity that he applied the Aformula@ approach for Chapter 13 individual bankruptcy 

cases as dictated by the Till plurality and, in so doing, explicitly declined to consider 

market forces. See 2014 WL 4436335, at *25-*26; see also id. at * 28 (AI conclude that [the 

American HomePatient] two-step method, generally speaking, misinterprets Till@). Judge 

Briccetti agreed with this approach. 531 B.R. at 334. As discussed, this was in error. 

The bankruptcy court should have the opportunity to engage the American HomePatient

analysis in earnest.
23

The 2012 Indentures governing the Senior-Lien Notes contain Optional 

Redemption Clauses, which provide for the payment of a make-whole premium13

(referred to as the AApplicable Premium@ in the indentures) if MPM were to 

Aredeem the Notes at its option@ prior to October 15, 2015. 15-1682 JA 2322.14

 

The make-whole premium was intended to ensure that the Senior-Lien Notes 

holders received additional compensation to make up for the interest they would 

not receive if the Notes were redeemed prior to their maturity date. 

In October 2014, the Debtors, pursuant to the Plan, issued replacement 

notes to the Senior-Lien Notes holders, which did not account for the 

make-whole premium. These holders contended that the failure to include 

that premium violated the 2012 Indentures. The bankruptcy court concluded that 

the Senior-Lien Notes holders were not entitled to the premium. It reasoned 

that under the 2012 Indentures the make-whole premium would be due only in 

the case of an Aoptional redemption@ and not in the case of an acceleration 

brought about by a bankruptcy filing. 2014 WL 4436335, at *11-*15. The 

district court agreed. 531 B.R. at 335-38. We too agree.

The Senior-Lien Notes holders claim entitlement to the make-whole 

premium for essentially three reasons: (i) they are entitled to the make-whole 

under the 2012 Indentures= Optional Redemption Clauses; (ii) they are entitled to 

it under the 2012 Indentures= Acceleration Clauses; and (iii) even if the 

indentures did not allow for a make-whole premium upon acceleration, they 

should not have been permanently barred from exercising their contractual right 

to rescind acceleration and thereby obtain the make-whole premium. 

1 

 13 A make-whole premium is a Acontractual substitute for interest lost on Notes 

redeemed before their expected due date.@ In re Energy Future Holdings Corp., 842 F.3d 

247, 251 (3d Cir. 2016) (AEFH@). As stated by the bankruptcy court, its purpose Ais to 

ensure that the lender is compensated for being paid earlier than the original maturity of 

the loan for the interest it will not receive . . . .@ 2014 WL 4436335, at *15.

14 We cite in this section to the indenture for the First-Lien Notes; the indenture for the 

1.5-Lien Notes is identical for relevant purposes. 
24

The Senior-Lien Notes holders= principal argument is that they are 

entitled to the make-whole premium because when MPM issued the replacement 

notes under the Plan, it Aredeemed@ the Notes Aat its option@ prior to maturity. 

This argument fails for the same reasons we rejected nearly identical arguments 

in In re AMR Corp., 730 F.3d 88 (2d Cir. 2013). There we rejected the note 

holders= argument that they were entitled to a make-whole premium following a 

debtor=s bankruptcy filing. We concluded that:

American=s bankruptcy petition triggered a default, and this 

default automatically accelerated the debt. That acceleration 

changed the date of maturity from some point in the future . . . to 

an earlier date based on the debtor=s default under the contract. . . 

. When the event of default occurred and the debt accelerated, 

the new maturity for the debt was November 29, 2011 [the date 

of the bankruptcy petition]. Consequently, American=s attempt 

to repay the debt in October 2012 was not a voluntary 

prepayment because [p]repayment can only occur prior to the 

maturity date.

Id. at 103 (internal citations and quotation marks omitted).

The Senior-Lien Notes holders argue AMR is inapplicable because it 

spoke only to Aprepayment@ rather than Aredemption.@ As the district court 

noted, the principle of AMR does not turn on the distinction between 

Aprepayment@ and Aredemption.@ 531 B.R. at 336-37. In fact, in AMR we 

stated that because AAmerican=s debt was accelerated . . . upon its bankruptcy 

filing [it] is not now voluntarily redeeming the notes.@ AMR, 730 F.3d at 109. 

We also held in AMR that acceleration brought about by a bankruptcy 

filing changes the date of maturity of the accelerated notes to the date of the 

petition. 730 F.3d at 103. Therefore, any payment on the accelerated notes 

following a bankruptcy filing would be a post-maturity payment. And, as the 

First-Lien Notes holders concede, the Aplain meaning of the term >redeem= is to 

>repay[] . . . a debt security . . . at or before maturity.=@ 15-1682 Br. of First-Lien 

Appellant 39 (emphasis added). Here, Debtors= payment was post-maturity, not 
25

Aat or before@ maturity. But see In re Energy Future Holdings Corp., 842 F.3d 

247, 255 (3d Cir. 2016). Moreover, even assuming MPM=s issuance of the 

replacement notes was a Aredemption,@ it would not have been Aat [MPM=s] 

option,@ as required to trigger the Optional Redemption Clauses. Rather, the 

obligation to issue the replacement notes came about automatically by operation 

of separate indenture provisions, the Automatic Acceleration Clauses. A 

payment made mandatory by operation of an automatic acceleration clause is not 

one made at MPM=s option. See AMR, 730 F.3d at 100B01.

2 

As discussed, the 2012 Indentures each contain an Acceleration Clause, 

which calls for the acceleration of payment of the Senior-Lien Notes under 

certain conditions constituting an Event of Default. Pursuant to Section 

6.01(g), one such event is MPM=s filing of a voluntary bankruptcy petition. 

Although most Events of Default allow the Senior-Lien Notes holders the option

of accelerating payment, a default brought about by MPM=s voluntary 

bankruptcy petition leads to an automatic acceleration under Section 6.02.15

 15 Section 6.02 provides: AIf an Event of Default specified in Section 6.01(f) or (g) with 

respect to MPM occurs, the principal of, premium, if any, and interest on all the Notes 

shall ipso facto become and be immediately due and payable without any declaration or 

other act on the part of the Trustee or any Holders.@ 15-1682 JA 2260.
26

The Senior-Lien Notes holders argue that the term Apremium, if any@ in 

the Acceleration Clauses requires that the make-whole premium is due upon an 

automatic acceleration. This argument fails in light of our conclusion that the 

Senior-Lien Notes holders are not entitled to the make-whole premium under the 

Optional Redemption Clauses. In other words, the make-whole premium is not 

due pursuant to the Acceleration Clauses= reference to Apremium, if any,@ for the 

simple reason that the more specific Optional Redemption Clauses which grant 

the make-whole are not triggered and thus no premium has been generated. See 

Aramony v. United Way of Am., 254 F.3d 403, 413 (2d Cir. 2001) (noting that 

Ait is a fundamental rule of contract construction that specific terms and exact 

terms are given greater weight than general language@ (internal quotation marks 

omitted)). 

3 

Finally, the Senior-Lien Notes holders argue that the lower courts erred in 

disregarding their contractual right to rescind acceleration, 16 a right that if 

invoked would have reinstated the original maturity date and thereby kept the 

Optional Redemption Clauses (and therefore the make-whole premium) in effect. 

AMR forecloses this argument as well. There, considering nearly 

identical indenture language, we concluded that a creditor=s post-petition 

invocation of a contractual right to rescind an acceleration triggered 

automatically by a bankruptcy filing is barred because it would be Aan attempt to 

modify contract rights and would therefore be subject to the automatic stay.@ 

730 F.3d at 102; see also id. at 102-03 (Aany attempt by U.S. Bank to rescind 

acceleration nowCafter the automatic stay has taken effectCis an effort to affect 

American=s contract rights, and thus the property of the estate@).

 16 AHolders of a majority in principal amount of outstanding Notes by notice to the Trustee may 

rescind any such acceleration with respect to the Notes and its consequences.@ 15-1682 JA 2260. 
27

The Senior-Lien Notes holders again attempt to distinguish AMR by 

relying on the fact that the acceleration provision there, unlike the one here, 

expressly disavowed the make-whole premium. According to the 1.5-Lien 

Notes holders, our concern in AMR was therefore with not allowing the creditors 

Aan end-run around their bargain by rescission.@ 15-1682 Br. of 1.5-Lien 

Appellant 45. This argument fails because, although the provisions at issue 

here do not expressly disallow the make-whole premium, the Optional 

Redemption Clauses, as we have seen, achieve this result. Therefore, just as in 

AMR, because the right to rescind acceleration here would serve as Aan end-run 

around their bargain by rescission,@ the lower courts correctly concluded that the 

automatic stay barred rescission of the acceleration of the Notes. 

V

Debtors seek dismissal of these appeals under the principle of equitable 

mootness, a Aprudential doctrine that is invoked to avoid disturbing a 

reorganization plan once implemented.@ In re Metromedia Fiber Network, Inc., 

416 F.3d 136, 144 (2d Cir. 2005).17

 The doctrine Aallows appellate courts to 

dismiss bankruptcy appeals >when, during 

the pendency of an appeal, events occur= such that >even though effective relief 

could conceivably be fashioned, implementation of that relief would be 

inequitable.=@ In re Motors Liquidation Co., 829 F.3d 135, 167 (2d Cir. 2016) 

(quoting In re Chateaugay Corp., 988 F.2d 322, 325 (2d Cir. 1993) (AChateaugay 

II@)). The doctrine requires us to Acarefully balance the importance of finality 

in bankruptcy proceedings against the appellant=s right to review and relief.@ In 

re Charter Commc=ns. Inc., 691 F.3d 476, 481 (2d Cir. 2012). With these 

principles in mind, we decline to dismiss any of these appeals as equitably moot.

 17 Debtors filed with the district court a motion to dismiss the appeal of the bankruptcy 

court=s confirmation order on the basis of equitable mootness. 15-1771 JA 4570-88. The 

district court made no ruling on the motion, concluding it was Amooted by this Court=s 

decision to affirm the Orders of the Bankruptcy Court.@ 531 B.R. at 338 n.14. Debtors 

then filed motions to dismiss on equitable mootness grounds with this Court, 15-1682 

Doc. 58; 15-1771 Doc. 62 , which we summarily denied without prejudice to Debtors 

Arais[ing] the issue . . . in their merits brief,@ 15-1682 Doc. 159; 15-1771 Doc. 102.
28

Where, as here, a reorganization plan has been substantially 

consummated, we presume that an appeal of that plan is equitably moot. In re 

BGI, Inc., 772 F.3d 102, 104 (2d Cir. 2014). That presumption, however, gives 

way where five factors first identified in Chateaugay II are met. They are, 

where: (i) effective relief can be ordered; (ii) relief will not affect the debtor=s 

re-emergence; (iii) relief Awill not unravel intricate transactions@; (iv) affected 

third-parties are notified and able to participate in the appeal; and (v) appellant 

diligently sought a stay of the reorganization plan. In re Charter, 691 F.3d at 

482. 

Although we require satisfaction of each Chateaugay II factor to 

overcome a mootness presumption, we have placed significant reliance on the 

fifth factor, concluding that a Achief consideration under Chateaugay II is 

whether the appellant sought a stay of confirmation.@ In re Metromedia, 416 

F.3d at 144. Along these lines, we concluded that A[i]f a stay was sought, we 

will provide relief if it is at all feasible, that is, unless relief would >knock the 

props out from under the authorization for every transaction that has taken place 

and create an unmanageable, uncontrollable situation for the Bankruptcy Court.=@

Id. (quoting Chateaugay II, 10 F.3d at 953). 

A special emphasis on this factor is sound. Equitable mootness issues 

only arise in earnest following a judicial determination that some facet of a 

reorganization plan violates the Code. It is generally considered 

inappropriately harsh to deny relief to which one is entitled on the purportedly 

equitable ground that the unfair (or illegal) plan has been put into effect, 

especially where a creditor took all appropriate steps to secure judicial relief. 

In such a case, we have held that it is proper to Aprovide relief if it is at all 

feasible.@ Id.

Here, the appellants immediately objected to various provisions of the 

Plan and promptly and consistently sought a stay in three different courts. Thus 

their diligence is not in question. Debtors nevertheless argue that these appeals 

should be dismissed as moot because of the cascading effects of rewriting the 

plan were the appellants to prevail. Specifically, they argue that Agranting the 
29

Noteholders= relief would alter a critical piece of the Plan resulting from the 

intense-multi-party negotiation, thereby impact[ing] other terms of the agreement 

and throw[ing] into doubt the viability of the Plan,@ and that according such 

relief Awould cause debilitating financial uncertainty@ to the emergent Debtor. 

15-1682 Br. of Appellees 69, 71 (internal quotation marks omitted).

In light of the limited nature of the remand we order, we do not believe 

these concerns will materialize. On remand, the bankruptcy court will only be 

called on to re-evaluate the interest to be received on the replacement notes held 

by the Senior-Lien Notes holders. The Debtors acknowledge that this might 

require, at most, $32 million of additional annual payments over seven years. 

15-1682 Br. of Appellees 69. The Debtors will not have to pay out the nearly 

$200 million they assert would be required to pay the Senior-Lien Notes holders=

make-whole premium, nor will any redistribution be required to the 

Subordinated Notes holders, as to which the plan is fair. In fact, our judgment 

allows for no redistribution other than that from the Debtors to the Senior-Lien 

Notes holders.

Given the scale of Debtors= reorganization, we are not persuaded that a 

payment of, perhaps, $32 million in annual payments over seven years, with no 

other redistribution from other creditors or third parties, would unravel the plan, 

threaten Debtors= emergence, or otherwise materially implicate the concerns 

identified in Chateaugay II. 

Our conclusion is supported by the findings of the lower courts, which 

had intimate familiarity with the Debtors= financial condition and the transactions 

that will arise from the reorganization. Although it made no determinative 

ruling as to equitable mootness, the bankruptcy court opined that Athe risk of 

equitable mootness is not strong here for either set of movants . . . the senior 

secured lender set of movants and the senior subordinated noteholder movants.@ 

15-1682 JA 4165 (emphasis added). The district court agreed. 15-1682 JA 

4837 (AI agree with Judge Drain that the risk of equitable mootness here is not 

very great . . .@). Debtors= request that we dismiss these appeals as equitably 

moot is denied.
30

VI 

To summarize, we conclude as follows: 

 

1. The Second-Lien Notes stand in priority to the Subordinated Notes.

2. The Senior-Lien Notes holders are not entitled to the make-whole 

premium.

3. The lower court erred in the process it used to calculate the interest rate 

applicable to the replacement notes received by the Senior-Lien Notes 

holders. On remand, the bankruptcy court should assess whether an 

efficient market rate can be ascertained, and, if so, apply it to the 

replacement notes.

4. We decline to dismiss any of these appeals as equitably moot.

For the foregoing reasons, we AFFIRM the District Court=s order in part, with 

respect to the priority of the Subordinated Notes and the Senior-Lien Notes holders=

entitlement to a make-whole premium; REVERSE the order in part, with respect to 

the method of calculating the interest rate on the Senior-Lien Notes holders=

replacement notes; and REMAND the matter for further proceedings consistent 

with this opinion.