Opinion ID: 204196
Heading Depth: 3
Heading Rank: 2

Heading: The Feasibility of the Plan

Text: To confirm a plan under Chapter 11, a bankruptcy court must find that the plan is feasible, or, more precisely, that [c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor ... unless such liquidation or reorganization is proposed in the plan. 11 U.S.C. § 1129(a)(11). DISH argues that the feasibility of this plan is purely speculative and that the bankruptcy court therefore should not have confirmed it. We review a finding of feasibility only for clear error, see In re Webb, 932 F.2d 155, 158 (2d Cir.1991), and we find none here. For a plan to be feasible, it must offer[] a reasonable assurance of success, but it need not guarantee[] success. Kane, 843 F.2d at 649. Some possibility of liquidation or further reorganization is acceptable and often unavoidable. The bankruptcy court applied this standard and found this plan feasible based primarily on four factors. DBSD I, 419 B.R. at 201-03. First, the plan dramatically deleverage[s] DBSD. Id. at 202; see In re Piece Goods Shops Co., 188 B.R. 778, 798 (Bankr.M.D.N.C.1995). Before bankruptcy, DBSD owed over $800 million; the projected debt of the reformed DBSD would be as low as $260 million as late as 2013. Given the bankruptcy court's valuation of a reorganized DBSD as worth between $492 million and $692 million, this debt reduction makes a big difference. Second, the court found it likely that DBSD would be able to obtain the capital it needs. DBSD has already received commitments for a credit facility to provide working capital for the first two years. DBSD I, 419 B.R. at 203. After two years, DBSD would need further capital, but the court found very reasonable the possibility that DBSD will be able to secure either more financing or a strategic investor. Id. As evidence of this possibility, the court pointed to expert testimony, actual offers that had been made (including DISH's own offer), and the ability of similar companies to access the capital markets. The court also noted the likely attractiveness to future investors of DBSD's control over 20MHz of prime bandwidth, a finite and very valuable resource. Id. at 194. Third, the court found little risk of default on DBSD's secured obligations to DISH, and still less risk that any such default would lead to the liquidation or financial reorganization that § 1129(a)(11) seeks to avert. Id. at 203. The plan makes the interest on DISH's First Lien Debt, which had been payable in cash, payable only in kind, with no cash due for four years. This feature buys DBSD breathing room to shore up its position before it becomes necessary to secure significant additional capital, as described above. Fourth, and finally, the bankruptcy court noted that general credit markets at the time of its decision in October 2009 had improved from their low a year before. Id. Although no one can predict market conditions two or four years down the road, the improvement the bankruptcy court noted was real, and increased the likelihood that DBSD will be able to repay its creditors. Based on all of these factors, the bankruptcy court found the plan of reorganization feasible. Id. We find the bankruptcy court's analysis thorough and persuasive. DISH's arguments to the contrary do not successfully identify any clear error in it. First, DISH argues that the bankruptcy court employed the wrong legal standard. DISH claims that a bankruptcy court cannot confirm a plan unless the proponents prove specifics ... as to how the Debtors would be able to meet their repayment obligations at the end of the Plan period. That is true at some level of generality, but exactly how specific those specifics must be depends on the circumstances. In most situations, the time immediately following bankruptcy will call for fairly specific proof of the company's ability to meet its obligationsas here, where it was undisputed that the Debtors have commitments for working capital financing for the next two years. DBSD I, 419 B.R. at 203. As one moves further away from the time of confirmation, however, the proof will necessarily become less and less specific. Had DBSD's plan called for the issuance of 20-year notes, for instance, no one would expect specifics about the sort of financing it might get in year 19. When a court is dealing with an intermediate time frame like the four years after which the balloon payment comes due in this case, the level of proof required will be somewhere in the middle. In this context, the bankruptcy court based its feasibility finding on sufficiently specific proof to conclude that DBSD would be likely to avoid reorganization or liquidation even after four years. Overall, the bankruptcy court both stated and applied the correct standard in this case, dooming DISH's legal challenge. Second, DISH argues that the district court clearly erred in its fact-finding. At most, DISH's arguments on this front demonstrate that there is some chance that DBSD might eventually face liquidation or further reorganization. But that small chance does not change the feasibility analysis, which requires only a reasonable assurance of success, not an absolute guarantee[]. Kane, 843 F.2d at 649. A small or even moderate chance of failure does not mean that the plan is  likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor. 11 U.S.C. § 1129(a)(11) (emphasis added). We therefore uphold the bankruptcy court's feasibility determination.