In Re MPM Silicones, LLC

15-1771; 15-1682; 15-1824
In re MPM Silicones, LLC

1 In the
2 United States Court of Appeals
3 For the Second Circuit
4
5 ________
6
7 August Term, 2016
8 ____________________________________________________________
9
10 In the Matter of: MPM Silicones, L.L.C.
11 ____________________________________________________________
12
13 Nos. 15-1682 (L); 15-1824 (CON)
14
15 MOMENTIVE PERFORMANCE MATERIALS INCORPORATED, APOLLO
16 GLOBAL MANAGEMENT, LLC, AD HOC COMMITTEE OF SECOND LIEN
17 HOLDERS,
18 Plaintiffs-Appellees,
19
20 v.
21
22 BOKF, NA, AS FIRST LIEN TRUSTEE, WILMINGTON TRUST, N.A., AS 1.5
23 LIEN TRUSTEE,
24 Defendants-Appellants.
25 ____________________________________________________________
26
27 No. 15-1771
28
29 U.S. BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE,
30 Plaintiff-Appellant,
31
32 v.
33
 1 WILMINGTON SAVINGS FUND SOCIETY, FSB, AS SUCCESSOR INDENTURE
2 TRUSTEE, MOMENTIVE PERFORMANCE MATERIALS INCORPORATED, AD
3 HOC COMMITTEE OF SECOND LIEN NOTEHOLDERS, APOLLO
4 MANAGEMENT, LLC, AND CERTAIN OF ITS AFFILIATED FUNDS,
5 Defendants-Appellees.
6 ____________________________________________________________
7
8 Appeals from the United States District Court
9 for the Southern District of New York.
10 Vincent L. Bricetti, Judge.
11 ________
12
13 Submitted: November 9, 2016
14 Decided: October 20, 2017
15 ________
16
17 Before: CABRANES, POOLER, and PARKER, Circuit Judges.
18 ________
19 Three groups of creditors separately appeal a judgment of the
20 United States District Court of the Southern District of New York
21 (Bricetti, J.) affirming the confirmation of Debtors’ Chapter 11
22 reorganization plan by the U.S. Bankruptcy Court (Drain, J.). The
23 creditors argue that the plan improperly eliminated or reduced the
24 value of notes they held. Debtors argue that the plan was properly
25 confirmed and that these appeals should be dismissed as equitably
26 moot. With one exception, we conclude that the plan confirmed by the
27 bankruptcy court and affirmed by the district court comports with the
28 provisions of Chapter 11. We remand so that the bankruptcy court can
29 address the single deficiency we identify with the proceedings below
30 which is the process for determining the proper interest rate under the
31 cramdown provision of Chapter 11. We decline to dismiss these
32 appeals as equitably moot.
33 ________
34
35

2
1 DOUGLAS HALLWARD-DRIEMEIER, Ropes & Gray
2 LLP, Washington D.C.; MARK R. SOMERSTEIN, MARK
3 I. BANE , Ropes & Gray, New York, NY, for
4 Wilmington Trust, National Association as Indenture
5 Trustee for the 1.5 Lien Notes.

6 DANIELLE SPINELLI, JOEL MILLAR, Wilmer Cutler
7 Pickering Hale and Dorr LLP, Washington, D.C.;
8 PHILIP D. ANKER, ALAN E. SCHOENFELD, Wilmer
9 Cutler Pickering Hale and Dorr LLP, New York,
10 NY; MICHAEL J. SAGE, BRAIN E. GREER, Dechert LLP,
11 New York, NY, G. ERIC BRUNSTAD, JR., Dechert LLP,
12 Hartford, CT, for BOKF, NA as First Lien Trustee.
13
14 SUSHEEL KIRPALANI, Quinn Emanuel Urquhart &
15 Sullivan, LLP, New York, NY; ROY T. ENGLERT, JR.,
16 MARK T. STANCIL, ALAN E. UNTEREINER, MATTHEW
17 M. MADDEN, Robbins, Russell, Englert, Orseck,
18 Untereiner & Sauber LLP, Washington, D.C., for
19 U.S. Bank National Association, as Indenture Trustee.
20
21 IRA S. DIZENGOFF, ABID QURESHI, BRIAN T. CARNEY,
22 Akin Gump Strauss Hauer & Feld LLP, New York,
23 NY; PRATIK A. SHAH , JAMES E. TYSSE, Z.W. JULIUS
24 CHEN, Akin Gump Strauss Hauer & Feld LLP,
25 Washington, D.C., for Momentive Performance
26 Materials Inc. and Apollo Management, LLC, and
27 certain of its affiliated funds.
28
29 JOSEPH T. BAIO, JAMES C. DUGAN, Willkie Farr &
30 Gallagher LLP, New York, NY, for Momentive
31 Performance Materials Inc.
32
33 DENNIS F. DUNNE, MICHAEL L. HIRSCHFELD ,
34 Milbank, Tweed, Hadley & McCloy LLP, New
35 York, NY, for Ad Hoc Committee of Second Lien
36 Noteholders.

3
 1 SETH H. LIEBERMAN, PATRICK SIBLEY, Pryor
2 Cashman LLP, New York, NY, for Wilmington
3 Savings Fund Society, FSB, as Successor Indenture
4 Trustee.
5
6 RONALD J. MANN, Columbia Law School, New
7 York, NY, for Amici Curiae Loan Syndications and
8 Trading Association, the Managed Funds Association,
9 and the Securities Industry and Financial Markets
10 Association.
11 ________

12 BARRINGTON D. PARKER, Circuit Judge:
13 These appeals by three groups of creditors challenge various
14 aspects of Appellee Momentive Performance Materials, Inc.’s
15 (“MPM,”) substantially consummated plan of reorganization under
16 Chapter 11 of the U.S. Bankruptcy Code.1 With one exception, we
17 conclude that the reorganization plan (the “Plan”) confirmed by the
18 bankruptcy court and affirmed by the district court comports with
19 Chapter 11. We remand so that the bankruptcy court can address the
20 single deficiency we identify in the proceedings below, which is the
21 process for determining the proper interest rate under the cramdown
22 provision of Chapter 11.

23 I
24 MPM, a leading producer of silicone, faced serious financial
25 problems after it took on significant new debt obligations beginning in

1
Momentive Performance Materials, Inc.’s “MPM,” and with affiliated debtors, “Debtors”.

4
 1 the mid-2000s.2 See 15-1771 JA 286-88; 15-1682 JA 1605-06.3 Following
2 these debt issuances, MPM was substantially overleveraged, and
3 ultimately filed a petition under Chapter 11. The four relevant classes
4 of notes issued by MPM are as follows:
5 Subordinated Notes. In 2006, MPM issued $500 million in
6 subordinated unsecured notes (the “Subordinated Notes”) pursuant to
7 an indenture (the “2006 Indenture”). 15-1771 JA 303. Appellant U.S.
8 Bank is the indenture trustee for the Subordinated Notes. In 2009 MPM
9 issued secured second-lien notes and offered the Subordinated Notes
10 holders the option of exchanging their notes for the newly-issued
11 second-lien notes. The second-lien notes were offered at a 60%
12 discount but were secured. 15-1771 JA 2241. Holders of $118 million
13 of the Subordinated Notes accepted the offer, leaving $382 million in
14 unsecured Subordinated Notes outstanding. 15-1771 JA 2241.
15 Second-Lien Notes. In 2010, MPM issued approximately $1 billion
16 in “springing” second-lien notes (the “Second-Lien Notes”). 15-1682
17 JA 1616; 15-1771 JA 476. The Second-Lien Notes were to be unsecured
18 until the $118 million of previously exchanged Subordinated Notes
19 were redeemed, at which point the “spring” in the lien would be
20 triggered. 15-1771 JA 517, 580-81. Once triggered, the Second-Lien
21 Notes would then (but only then) obtain a security interest in the
22 Debtor’s collateral. The exchanged Subordinated Notes were
23 redeemed in November 2012, 15-1771 JA 721, at which point the trigger
24 occurred and the Second-Lien Notes became secured with second-
25 priority liens junior to other pre-existing liens on the Debtors’

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 “oblig[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 “JA” are to the respective joint appendices filed with that appeal. For example,
our citation to “15-1771 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.

5
 1 collateral. A primary issue on this appeal is whether the Second-Lien
2 Notes have priority over the Subordinated Notes .
3 Senior-Lien Notes. In 2012, MPM again issued more debt, this
4 time in the form of two classes of senior secured notes. Specifically,
5 MPM issued $1.1 billion in first-lien secured notes (the “First-Lien
6 Notes”), and $250 million in 1.5-lien secured notes (the “1.5-Lien
7 Notes,” and, with the First-Lien Notes, the “Senior-Lien Notes”). 15-
8 1682 JA 1615. Appellants BOKF and Wilmington Trust are the
9 indenture trustees for the First-Lien Notes and 1.5-Lien Notes,
10 respectively. Pursuant to the governing indentures (the “2012
11 Indentures”), the Senior-Lien Notes were to be repaid in full by their
12 maturity date of October 15, 2020. They carried fixed interest rates of
13 8.875% and 10%, respectively. The 2012 Indentures also called for the
14 recovery of a “make-whole” premium if MPM opted to redeem the
15 notes prior to maturity. Because the Second-Lien Notes and the Senior-
16 Lien Notes are secured by the same collateral, the holders of those
17 notes executed an intercreditor agreement (the “Intercreditor
18 Agreement”), which provided that the Senior-Lien Notes stood in
19 priority to the Second-Lien Notes as to their respective liens, but that
20 each was junior to pre-existing liens on MPM’s collateral. 15-1771 JA
21 691-718. Other primary issues on this appeal are whether the Senior-
22 Lien Note holders are entitled to the make-whole adjustment and the
23 cramdown interest rate they are entitled to if their Notes are replaced
24 under the Plan.

25 II
26 After these notes were issued, MPM experienced significant
27 financial problems. See 15-1771 JA 284-88. In April 2014, MPM filed a
28 petition under Chapter 11 and ultimately submitted a reorganization
29 plan to the bankruptcy court. 15-1682 JA 3841-912. Several elements
30 of that Plan are at issue on these appeals. The Plan provided for (i) a
31 100% cash recovery of the principal balance and accrued interest on the
32 Senior-Lien Notes; (ii) an estimated 12.8%-28.1% recovery on the
33 Second-Lien Notes in the form of equity in the reorganized Debtors;
34 but (iii) no recovery on the Subordinated Notes. 15-1771 JA 271-74.
35 The Plan also gave the Senior-Lien Notes holders the option of
36 (i) accepting the Plan and immediately receiving a cash payment of the

6
 1 outstanding principal and interest due on their Notes (without a make-
2 whole premium), or (ii) rejecting the Plan, receiving replacement notes
3 “with a present value equal to the Allowed amount of such holder’s
4 [claim],” and then litigating in the bankruptcy court issues including
5 whether they were entitled to the make-whole premium and the
6 interest rate on the replacement notes. 15-1771 JA 271-72; 15-1682 JA
7 3873-75. The Senior-Lien Notes holders rejected the Plan, and, thus,
8 elected the latter option.
9 The appellants here—the Subordinated Notes holders and the
10 Senior-Lien Notes holders—opposed the Plan. (The Second-Lien Notes
11 holders unanimously accepted it.) The Subordinated Notes holders,
12 who were to receive nothing, contended that, under relevant indenture
13 provisions, their Notes were not subordinate to the Second-Lien Notes
14 holders and, consequently, they were entitled to some recovery. The
15 Senior-Lien Notes holders opposed the Plan on the ground that the
16 replacement notes they received did not provide for the make-whole
17 premium, and carried a largely risk-free interest rate that failed to
18 comply with the Code because it was well below ascertainable market
19 rates for similar debt obligations and thus was not fair and equitable
20 because it failed to give them the present value of their claim.
21 Despite these objections, the bankruptcy court confirmed the
22 Plan following a four-day hearing. In re MPM Silicones, LLC, 2014 WL
23 4436335 (Bankr. S.D.N.Y. Sept. 9, 2014), aff’d, 531 B.R. 321 (S.D.N.Y.
24 2015). Confirmation was facilitated by Chapter 11's “cramdown”
25 provision, which allows a bankruptcy court to confirm a reorganization
26 plan notwithstanding non-accepting classes if the plan “does not
27 discriminate unfairly, and is fair and equitable, with respect to each
28 class of claims or interests that is impaired under, and has not accepted,
29 the plan.” 11 U.S.C. § 1129(b)(1).
30 The bankruptcy court concluded that the Plan was fair to the
31 Subordinated Notes holders, despite no recovery, because the 2006
32 Indenture called for their subordination to the Second-Lien Notes. In
33 re MPM Silicones, LLC, 2014 WL 4436335, at *2-*11. It held the plan was
34 fair to the Senior-Lien Notes holders because the 2012 Indentures did
35 not require payment of the make-whole premium in the bankruptcy
36 context and because the interest rate on the proposed replacement

7
 1 notes, even though well below a “market” rate, was determined by a
2 formula that complied with the Code’s cramdown provision. Id. at *11-
3 *32.
4 The bankruptcy court’s confirmation order triggered an
5 automatic 14-day stay during which Debtors could not consummate the
6 Plan. See Fed. R. Bankr. P. 3020(e). Appellants aggressively took
7 advantage of this period and attempted to block the implementation
8 of the Plan. Specifically, prior to the expiration of the automatic stay,
9 appellants moved in the bankruptcy court to extend the stay pending
10 their appeal of the confirmation order, which the court denied. See 15-
11 1682 JA 4099, 4173. They then promptly moved the district court for
12 a stay, which was also denied. See 15-1682 JA 183, 185. Appellants then
13 appealed the denial of the stay to this Court, and we dismissed the
14 appeal for lack of jurisdiction. 15-1682 JA 4872-73. Despite these
15 efforts, the Debtors contend this appeal is equitably moot, a contention
16 with which we do not agree.
17 The appellants appealed the confirmation order to the district
18 court which affirmed the bankruptcy court’s confirmation order. 531
19 B.R. 321. The district court essentially agreed with the bankruptcy
20 court, concluding that: (i) the relevant indentures unambiguously
21 prioritize the Second-Lien Notes over the Subordinated Notes, id. at
22 326–31; (ii) the below market interest rate selected by the bankruptcy
23 court complied with the Code, id. at 331–34; and (iii) under their
24 indentures, the Senior-Lien Notes holders are not entitled to the make-
25 whole premium in the context of a bankruptcy, id. at 335–38. The
26 Subordinated Notes holders, the First-Lien Notes holders, and the 1.5-
27 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).

8
 1 III
2 “We exercise plenary review over a district court’s affirmance of
3 a bankruptcy court’s decisions, reviewing de novo the bankruptcy
4 court’s conclusions of law, and reviewing its findings of facts for clear
5 error.” In re Lehman Bros., Inc., 808 F.3d 942, 946 (2d Cir. 2015) (internal
6 quotation marks omitted).

7 IV
8 These appeals raise four issues. First, the Subordinated Notes
9 holders challenge the lower courts’ conclusions that their claims are
10 subordinate to the Second-Lien Notes holders’ claims. Second, the
11 Senior-Lien Notes holders contend that the lower courts erroneously
12 applied a below-market interest rate to their replacement notes. Third,
13 the Senior-Lien Notes holders challenge the lower courts’ rulings that
14 they are not entitled to a make-whole premium. Finally, Debtors argue
15 that we should dismiss these appeals as equitably moot. We find merit
16 only in the Senior-Lien Notes holders’ contention with respect to the
17 method of calculating the appropriate interest rate for the replacement
18 notes. We reject the others.

19 A
20 The lower courts concluded that the Plan, which provided no
21 distribution to the Subordinated Notes holders, complied with the
22 governing 2006 Indenture. The Subordinated Notes holders argue this
23 conclusion was erroneous because, under the terms of the 2006
24 Indenture, their claims are not subordinate to the Second-Lien Notes,
25 whose holders recovered under the plan. The Debtors, on the other
26 hand, contend that the 2006 Indenture gives the Second-Lien Notes
27 priority over the Subordinated Notes. We agree with the Debtors,
28 although for somewhat different reasons from the lower courts which
29 found the relevant indenture provisions unambiguous. We find them
30 to be ambiguous, but resolve the ambiguities in favor of the Debtors.
31

9
 1 The Subordinated Notes holders’ argument begins with Section
2 10.01 of the 2006 Indenture, which states that the Subordinated Notes
3 are “subordinated in right of payment . . . to the prior payment in full
4 of all existing and future Senior Indebtedness of the Company,” and
5 that “only Indebtedness of the Company that is Senior Indebtedness of
6 the Company shall rank senior to the Securities in accordance with the
7 provisions set forth herein.” 15-1771 JA 404. Accordingly, the Second-
8 Lien Notes stand in priority to the Subordinated Notes only if they
9 constitute “Senior Indebtedness.”
10 “Senior Indebtedness” in the 2006 Indenture begins with what
11 the parties refer to as the “Baseline Definition,” which defines Senior
12 Indebtedness as:

13 all Indebtedness . . . unless the instrument creating or
14 evidencing the same or pursuant to which the same is
15 outstanding expressly provides that such obligations are
16 subordinated in right of payment to any other
17 Indebtedness of the Company . . .

18 15-1771 JA 341.
19 It is undisputed that the Second-Lien Notes are not subordinated
20 in right of payment to any other indebtedness and that therefore they
21 satisfy the Baseline Definition of Senior Indebtedness. However, the
22 Baseline Definition is then subject to six enumerated exceptions, the
23 fourth of which (the “Fourth Proviso”) excepts from Senior
24 Indebtedness:

25 any Indebtedness or obligation of the Company . . . that
26 by its terms is subordinate or junior in any respect to any
27 other Indebtedness or obligation of the Company . . .
28 including any Pari Passu Indebtedness.

29 15-1771 JA 342 (emphasis added).

10
 1 The Subordinated Notes holders argue that the Fourth Proviso
2 carves out the Second-Lien Notes from the Baseline Definition, i.e., that
3 the Second-Lien Notes are an “[i]ndebtedness or obligation of the
4 Company . . . that by its terms is subordinate or junior in any respect to
5 any other Indebtedness of the Company.” The Subordinated Notes
6 holders rely heavily on the “in any respect” language. They argue that
7 the Second-Lien Notes are subordinate to, for example, the First-Lien
8 Notes—because, pursuant to the Intercreditor Agreement, the liens
9 supporting the Second-Lien Notes are junior to the liens supporting the
10 First-Lien Notes—and that they are therefore subordinate to other
11 Indebtedness of the company.
12 The lower courts rejected this argument, and concluded that the
13 Second-Lien Notes unambiguously constitute Senior Indebtedness
14 despite the Fourth Proviso. They did so in reliance on a distinction
15 between “lien subordination” and “payment (or debt) subordination,”
16 concluding that the Fourth Proviso unambiguously carves out from the
17 Baseline Definition only the latter and not the former.5 Because the
18 Second-Lien Notes are not subordinate in payment to other note
19 classes—but rather, the liens supporting their notes are
20 subordinate—the lower courts concluded that the Second-Lien Notes
21 are not covered by the Fourth Proviso.
22 We do not agree with the lower courts that the Fourth Proviso
23 unambiguously incorporates a distinction between lien subordination
24 and payment subordination. Rather, we conclude that the Fourth
25 Proviso renders the definition of Senior Indebtedness ambiguous as to
26 whether it includes the Second-Lien Notes. Nevertheless, we conclude

5
The district court discussed in some detail the distinction between lien subordination and
payment/debt subordination. 531 B.R. at 328. In short, “[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.

11
 1 that this ambiguity should be resolved in Debtors’ favor given the
2 plethora of evidence in the record that the parties intended the Second-
3 Lien Notes to be Senior Indebtedness.

4 1
5 As discussed, the lower courts concluded that the Second-Lien
6 Notes are unambiguously Senior Indebtedness. Under New York law,
7 which governs the Indenture, a fundamental objective of contract
8 interpretation is to give effect to the expressed intention of the parties.
9 The initial inquiry is whether the contractual language, without
10 reference to sources outside the text of the contract, is ambiguous.
11 Contract language is ambiguous if it is capable of more than one
12 meaning.
13 We are not persuaded by the Debtors’ (and lower courts’)
14 conclusion that the Fourth Proviso’s reference to “subordinate . . . in
15 any respect” unambiguously refers only to payment subordination and
16 not to lien subordination. The Debtors read the Fourth Proviso as if it
17 states “subordinate . . . in right of payment,” which of course it does not.
18 In so doing, the Debtors disregard the breadth of the term “in any
19 respect,” a term which is generally thought to be as broadly
20 encompassing as possible.6 And, as a practical matter, it seems to us
21 illogical to believe that a second-lien holder does not possess an
22 obligation that is meaningfully subordinate in some respect to a first-
23 lien holder. These sophisticated parties knew how to cabin the type of
24 subordination to which they refer; the indenture uses the term
25 “subordinate . . . in right of payment” many times, including in the
26 Baseline Definition itself.
27 Moreover, the Debtors’ interpretation renders language in the
28 indenture superfluous, which is a common sign of ambiguity. See RJE

6
Debtors’ attempt to downplay the significance of the term “in any respect” in this context
is unconvincing given that the term appears nowhere else in the indenture other than in the
Fourth Proviso.

12
 1 Corp. v. Northville Indus. Corp., 329 F.3d 310, 314 (2d Cir. 2003) (in
2 assessing ambiguity, courts consider the entire contract “to safeguard
3 against adopting an interpretation that would render any individual
4 provision superfluous” (internal quotation marks omitted)); see also
5 Lawyers’ Fund for Client Protection of State of N.Y. v. Bank Leumi Trust Co.
6 of New York, 94 N.Y.2d 398, 404 (N.Y. 2000) (concluding that an
7 interpretation that renders a portion of a contract superfluous is
8 “unsupportable: under standard principles of contract interpretation).
9 Specifically, if the Fourth Proviso only excepts debt subordinate in right
10 of payment, there is no purpose for the “in right of payment” carve-out
11 in the Baseline Definition. We disagree with the lower courts’ attempts
12 to interpret away this superfluity by finding a distinction between
13 “expressly” (in the Baseline Definition) and “by its terms” (in the
14 Fourth Proviso). We see no meaningful distinction between those
15 terms.
16 Nevertheless, we also conclude that the Subordinated Notes
17 holders’ interpretation, that the Fourth Proviso unambiguously
18 excludes the Second-Line Notes from the definition of Senior
19 Indebtedness, is incorrect. As the lower courts correctly concluded, the
20 Subordinated Notes holders’ interpretation renders key parts of the
21 Baseline Definition superfluous. Under their reading, that definition
22 excludes from Senior Indebtedness only obligations subordinate “in
23 right of payment,” but the Fourth Proviso excludes all obligations that
24 stand behind any type of other obligation. If so, the Baseline
25 Definition’s more limited carve-out for debt subordinate “in right of
26 payment” would be unnecessary, because all such debt would be
27 carved out from the definition of Senior Indebtedness by the Fourth
28 Proviso.
29 As the Subordinated Notes holders correctly acknowledge, “[f]or
30 this indenture, it simply is not possible to avoid superfluity.” 15-1771
31 Br. of Appellant 54 (internal quotation marks omitted). Where, as here,
32 varying interpretations render contractual language superfluous, we

13
 1 are not obligated to arbitrarily select one as opposed to another.
2 Because the 2006 Indenture is open to differing reasonable
3 interpretations as to whether the Second-Lien Notes constitute Senior
4 Indebtedness, we conclude that it is ambiguous as a matter of law.
5
6 2
7 Where a contract term is ambiguous, we look to extrinsic
8 evidence to determine the intention of the parties. That evidence can
9 include the parties’ apparent intention, Walk-In Medical Centers, Inc. v.
10 Breuer Capital Corp., 818 F.2d 260, 264 (2d Cir. 1987), what would be
11 commercially reasonable, Fundamental Long Term Care Holdings, LLC v.
12 Cammeby’s Funding LLC, 20 N.Y.3d 438, 445 (2013), and the “parties’
13 interpretation of the contract in practice, prior to litigation,” Ocean
14 Transp., Inc. v. American Philippine Fiber Indus., Inc., 743 F.2d 85, 91 (2d
15 Cir. 1984). Applying these tools, we conclude, as did the district court,
16 that the parties understood that the Second-Lien Notes constituted
17 Senior Indebtedness. See 531 B.R at 331 n.7.
18 First, MPM repeatedly represented to the Securities Exchange
19 Commission and to the financial community that the Second-Lien
20 Notes were Senior Indebtedness. It did so in its prospectuses, 8-Ks and
21 10-Ks. For example, it disclosed in a November 2010 8-K that the
22 Second-Lien Notes are “senior indebtedness of the Company . . . and
23 will rank . . . senior in right of payment to all existing and future
24 subordinated indebtedness.” 15-1771 JA 3057; see also 15-1771 JA 2231.
25 It went further when it subsequently resold certain Subordinated
26 Notes. In a May 2013 prospectus, MPM restated that the Subordinated
27 Notes “are subordinated to all our existing and future senior debt,
28 including the . . . Second-Priority Springing-Lien Notes.” MPM also
29 specifically identified as the first risk related to the Subordinated Notes
30 that those holders’ “right to receive payments on the Notes is junior to
31 those lenders who have a security interest in our assets.” 15-1771 JA
32 3007, 3010. MPM further asserted that in the event it were to file for

14
 1 bankruptcy and were unable to repay its secured debt, “it is possible
2 that there would be no assets remaining from which your claims could
3 be satisfied.” 15-1771 JA 3010. The Subordinated Note holders knew
4 all of this because the Debtors were contractually obligated, pursuant
5 to Section 4.02 of the 2006 Indenture, to provide copies of its 10-Ks, 10-
6 Qs, 8-Ks, and all other required disclosures both to the Subordinated
7 Note holders as well as to their Trustee—a highly sophisticated group
8 of investors. 15-1771 JA 357. There is no dispute that these disclosures
9 occurred. Consequently, it was widely understood in the investment
10 community that the Second-Lien Notes had priority.
11 Second, the Subordinated Notes holders’ interpretation generates
12 the irrational outcome that the springing of the Second-Lien Notes’
13 security interest, which was meant to enhance the note holders’
14 protection, would actually strip those notes of their status as Senior
15 Indebtedness and therefore their priority over the Subordinated Notes.
16 As the bankruptcy court concluded, “[t]here is no logical reason for
17 such a distinction, notwithstanding the subordinated noteholders’
18 attempt to find one.” 2014 WL 4436335, at *9.
19 Third, the Subordinated Notes holders’ proposed interpretation
20 that “in any respect” covers all junior liens would mean that no senior
21 note classes would qualify as Senior Indebtedness because each was
22 secured in some respect by a junior lien. For example, the First-Lien
23 Notes were secured in part by a second priority lien on collateral
24 securing a prepetition revolving credit facility. See 15-1771 JA 2425-26.
25 We think it highly improbable that anyone understood this
26 interpretation to be correct. Certainly MPM did not. For example, in a
27 December 2012 prospectus MPM represented to the SEC that the Senior-
28 Lien Notes were Senior Indebtedness. 15-1771 JA 3725. Because those
29 note classes are subordinate to pre-existing liens as to the Debtors’
30 collateral, they, too, would seemingly not qualify as Senior Indebtedness
31 under the Subordinated Notes holders’ interpretation. In light of these
32 factors, we have little trouble concluding that the extrinsic evidence

15
 1 establishes that the most reasonable interpretation of the Indenture is
2 that the Second-Lien Notes are Senior Indebtedness. The judgment of
3 the district court on that issue is, therefore, affirmed.

4 B
5 As a consequence of rejecting the Plan, the Senior-Lien Notes
6 holders received replacement notes which pay out their claim over time.
7 The Code permits debtors to make such “deferred cash payments” to
8 secured creditors (i.e., to “cramdown”). 11 U.S.C. § 1129(b)(2)(A)(i)(II).
9 However, those payments must ultimately amount to the full value of
10 the secured creditors’ claims. Id. To ensure the creditor receives the full
11 present value of its secured claim, the deferred payments must carry an
12 appropriate rate of interest. See Rake v. Wade, 508 U.S. 464, 472 n.8
13 (1993).
14 The rate selected by the lower courts for the Senior-Lien Note
15 holders’ replacement notes was based on the “formula” rate. The
16 bankruptcy court selected interest rates of 4.1% and 4.85%, respectively,
17 which were largely risk-free rates slightly adjusted for appropriate risk
18 factors. It is not disputed that this rate is below market in comparison
19 with rates associated with comparable debt obligations. The Debtors
20 defend the application of the “formula” method on the ground that it is
21 required by the plurality opinion in the Chapter 13 case of Till v. SCS
22 Credit Corp., 541 U.S. 465 (2004).
23 The Senior-Lien Notes holders contend that because this rate is
24 too low, the Plan is not “fair and equitable” as required by § 1129(b).
25 They argue that the lower courts should have applied a market rate of
26 interest which is the rate MPM would pay to a contemporaneous
27 sophisticated arms-length lender in the open market. The Senior-Lien
28 Notes holders argued in the bankruptcy court that such a market exists
29 and would generate interest in the 5-6+% range. See 15-1682 JA 464,

16
 1 1941.7
2 The bankruptcy court rejected this approach, and concluded that
3 a cramdown interest rate should “not take market factors into account.”
4 2014 WL 4436335, at *25. Viewing itself as “largely governed by the
5 principles enunciated by the plurality opinion in Till v. SCS Credit Corp.,
6 541 U.S. 465 (2004),” it concluded that the proper rate was what the
7 plurality in Till referred to as the “formula” or “prime-plus” rate
8 (discussed more fully below). Id. at *24, *26. The district court agreed.
9 531 B.R. at 332–34. The Senior-Lien Notes holders argue on appeal that
10 the lower courts erred in concluding that the Till plurality opinion is
11 wholly applicable to this Chapter 11 proceeding. In substantial part, we
12 agree.
13 At issue in Till was a Chapter 13 debtor’s sub-prime auto loan,
14 carrying an interest rate of 21% and providing the creditor with a $4,000
15 secured claim. As with Chapter 11, Chapter 13 allows debtors to
16 provide secured creditors with future property distributions (such as
17 deferred cash payments) whose total ‘value, as of the effective date of
18 the plan, . . . is not less than the allowed amount of such claim.” 11
19 U.S.C. § 1325(a)(5)(B)(ii). The question became, as here, how to calculate
20 the interest on the deferred payments such that the creditor would
21 receive the full value of its claim. No single interest-calculation method
22 secured a majority vote on the Court, resulting in a plurality opinion
23 endorsing the “formula” method.
24 The “formula” approach endorsed by the Till plurality instructs
25 the bankruptcy court to begin with a largely risk-free interest rate,

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
 1 specifically, the “national prime rate . . . which reflects the financial
2 market’s estimate of the amount a commercial bank should charge a
3 creditworthy commercial borrower to compensate for the opportunity
4 costs of the loan, the risk of inflation, and the relatively slight risk of
5 default.” 541 U.S. at 479. The bankruptcy court should then hold a
6 hearing to determine a proper plan-specific risk adjustment to that
7 prime rate “at which the debtor and any creditors may present
8 evidence.” Id. Using this approach, “courts have generally approved
9 adjustments [above the prime rate] of 1% to 3%.” Id. at 480.8
10 The Till plurality arrived at the “formula” rate after rejecting a
11 number of alternative methods relied on by the lower courts.
12 Significantly, it rejected methods relying on purported “market” rates
13 of interest because those rates “must be high enough to cover factors,
14 like lenders’ transactions costs and overall profits, that are no longer
15 relevant in the context of court-administered and court-supervised
16 cramdown loans.” 541 U.S. at 477. The plurality then identified the
17 only factors it viewed as relevant in properly ensuring that the sum of
18 deferred payments equals present value: (i) the time-value of money; (ii)
19 inflation; and (iii) the risk of non-payment. Id. at 474. The plurality
20 concluded that the “formula” or “prime-plus” method best reflects
21 those considerations.
22 Although Till involved a Chapter 13 petition, the plurality
23 intimated that the “formula” method might be applicable to rate
24 calculations made pursuant to other similarly worded Code provisions.
25 In fact, it cited the Chapter 11 cramdown provision, 11 U.S.C. §
26 1129(b)(2)(A)(i)(II), among many other provisions, when it noted that

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.

18
 1 “[w]e think it likely that Congress intended bankruptcy judges and
2 trustees to follow essentially the same approach when choosing an
3 appropriate interest rate under any of these [Code] provisions.” Id. at
4 474 & n.10.
5 Despite that language, however, the plurality made no conclusive
6 statement as to whether the “formula” rate was generally required in
7 Chapter 11 cases. And, notably, the plurality went on to state, in the
8 opinion’s much-discussed footnote 14, that the approach it felt best
9 applied in the Chapter 13 context may not be suited to Chapter 11.
10 Specifically, in that footnote , the Court stated that in Chapter 13
11 cramdowns “there is no free market of willing cramdown lenders.” 541
12 U.S. at 476 n.14. It continued: “[i]nterestingly, the same is not true in the
13 Chapter 11 context, as numerous lenders advertise financing for
14 Chapter 11 debtors in possession. Thus, when picking a cramdown rate
15 in a Chapter 11 case, it might make sense to ask what rate an efficient
16 market would produce.” Id. (internal citations omitted) (emphasis in
17 original).9
18 Many courts have relied on footnote 14 to conclude that efficient
19 market rates for cramdown loans cannot be ignored in Chapter 11 cases.
20 Most notably, the Sixth Circuit, “tak[ing] [its] cue from Footnote 14” of
21 the Till plurality, adopted a two-part process for selecting an interest
22 rate in Chapter 11 cramdowns:

23 [T]he market rate should be applied in Chapter 11 cases
24 where there exists an efficient market. But where no
25 efficient market exists for a Chapter 11 debtor, then the
26 bankruptcy court should employ the formula approach
27 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.

19
 1 In re American HomePatient, Inc., 420 F.3d 559, 568 (6th Cir. 2005). In
2 applying this rule, courts have held that markets for financing are
3 ‘efficient’ where, for example, “they offer a loan with a term, size, and
4 collateral comparable to the forced loan contemplated under the
5 cramdown plan.” In re Texas Grand Prairie Hotel Realty, L.L.C., 710 F.3d
6 324, 337 (5th Cir. 2013).10
7 We adopt the Sixth Circuit’s two-step approach, which, in our
8 view, best aligns with the Code and relevant precedent. We do not read
9 the Till plurality as stating that efficient market rates are irrelevant in
10 determining value in the Chapter 11 cramdown context. And,
11 disregarding available efficient market rates would be a major departure
12 from long-standing precedent dictating that “the best way to determine
13 value is exposure to a market.” Bank of Am. Nat’l Trust and Sav. Ass’n v.
14 203 N. LaSalle St. P’ship, 526 U.S. 434, 457 (1999) (assessing a Chapter 11
15 cramdown); see also United States v. 50 Acres of Land, 469 U.S. 24, 25 & n.1
16 (1984) (“fair market value” is “what a willing buyer would pay in cash
17 to a willing seller” (internal quotation marks omitted)). In Bank of
18 America, the Court noted that “one of the Code’s innovations [was] to
19 narrow the occasions for courts to make valuation judgments,” and
20 expressed a “disfavor for decisions untested by competitive choice . . .
21 when some form of market valuation may be available.” Bank of America,
22 526 U.S. at 457-58.
23 The Senior-Lien Notes holders presented expert testimony in the
24 bankruptcy court that, if credited, would have established a market rate.
25 This evidence showed that if the Senior-Lien Noteholders were to have
26 approved the Plan and accepted a cash-out payment for their notes,
27 MPM would have had to secure exit financing to cover the lump-sum
28 payment. In preparation for that possible eventuality (which did not

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 “follow the majority approach” first outlined in American HomePatient).

20
 1 come to pass in light of the Senior-Lien Notes holders’ rejection of the
2 Plan), MPM went out into the market seeking lenders to provide that
3 financing. Those lenders quoted MPM rates of interest ranging between
4 5 and 6+%. See In re MPM Silicones, LLC, 2014 WL 4436335, at *29.
5 At these rates, the First-Lien Note holders contend that they
6 would have received around $150 million more than the Plan offered,
7 Br. of First-Lien Appellant 25, 33. The 1.5-Lien Note holders claim that
8 the interest rate chosen by the lower courts led them to receive notes
9 “valued by the market at less than 93 cents on the value of the secured
10 claims,” Br. of 1.5-Lien Appellant 20.11 The Plan was objectionable to the
11 Senior-Lien Notes holders because, in essence, it required them to lend
12 Debtors a significant sum of money and receive a much lower rate of
13 interest than any other lender would have received for offering the same
14 loan to MPM on the open market.
15 When dealing with a sub-prime loan in the Chapter 13 context,
16 “value” can be elusive because the market is not necessarily efficient
17 and the borrower is typically unsophisticated. However, where, as
18 here, an efficient market may exist that generates an interest rate that is
19 apparently acceptable to sophisticated parties dealing at arms-length,
20 we conclude, consistent with footnote 14, that such a rate is preferable
21 to a formula improvised by a court. See Bank of America, 526 U.S. at 457;
22 see also In re Valenti, 105 F.3d at 63 (the goal of the cramdown rate “is to
23 put the creditor in the same economic position that it would have been
24 in had it received the value of its allowed claim immediately”); see also
25 15-1682 JA 3428 (First-Lien Notes holders’ expert testifying that because
26 the First-Lien Notes holders “are pricing it at the market . . . they’re
27 being compensated for the underlying risk that they are taking,” and
28 not for any “imbedded profit”).

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.

21
 1 We understand that the complexity of the task of determining an
2 appropriate market rate will vary from case to case. In some cases the
3 task will be straightforward, in others it will be more complex. But, at
4 the end of the day, we have no reason to believe the task varies
5 materially in difficulty from the myriad tasks which we regularly rely
6 on the expertise of our bankruptcy courts to resolve.
7 We therefore conclude that the lower courts erred in categorically
8 dismissing the probative value of market rates of interest. We remand
9 so that the bankruptcy court can ascertain if an efficient market rate
10 exists and, if so, apply that rate, instead of the formula rate.12 We arrive
11 at no conclusion with regard to the outcome of this inquiry.

12 C
13 The 2012 Indentures governing the Senior-Lien Notes contain
14 Optional Redemption Clauses, which provide for the payment of a
15 make-whole premium13 (referred to as the “Applicable Premium” in the
16 indentures) if MPM were to “redeem the Notes at its option” prior to
17 October 15, 2015. 15-1682 JA 2322.14 The make-whole premium was

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 “formula” 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 (“I 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.

13
A make-whole premium is a “contractual 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) (“EFH”). As stated by the bankruptcy court, its purpose “is 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.

22
 1 intended to ensure that the Senior-Lien Notes holders received
2 additional compensation to make up for the interest they would not
3 receive if the Notes were redeemed prior to their maturity date.
4 In October 2014, the Debtors, pursuant to the Plan, issued
5 replacement notes to the Senior-Lien Notes holders, which did not
6 account for the make-whole premium. These holders contended that
7 the failure to include that premium violated the 2012 Indentures. The
8 bankruptcy court concluded that the Senior-Lien Notes holders were
9 not entitled to the premium. It reasoned that under the 2012 Indentures
10 the make-whole premium would be due only in the case of an “optional
11 redemption” and not in the case of an acceleration brought about by a
12 bankruptcy filing. 2014 WL 4436335, at *11-*15. The district court
13 agreed. 531 B.R. at 335-38. We too agree.
14 The Senior-Lien Notes holders claim entitlement to the make-
15 whole premium for essentially three reasons: (i) they are entitled to the
16 make-whole under the 2012 Indentures’ Optional Redemption Clauses;
17 (ii) they are entitled to it under the 2012 Indentures’ Acceleration
18 Clauses; and (iii) even if the indentures did not allow for a make-whole
19 premium upon acceleration, they should not have been permanently
20 barred from exercising their contractual right to rescind acceleration and
21 thereby obtain the make-whole premium.

22 1
23 The Senior-Lien Notes holders’ principal argument is that they
24 are entitled to the make-whole premium because when MPM issued the
25 replacement notes under the Plan, it “redeemed” the Notes “at its
26 option” prior to maturity. This argument fails for the same reasons we
27 rejected nearly identical arguments in In re AMR Corp., 730 F.3d 88 (2d
28 Cir. 2013). There we rejected the note holders’ argument that they were
29 entitled to a make-whole premium following a debtor’s bankruptcy
30 filing. We concluded that:

23
 1 American’s bankruptcy petition triggered a default, and
2 this default automatically accelerated the debt. That
3 acceleration changed the date of maturity from some point
4 in the future . . . to an earlier date based on the debtor’s
5 default under the contract. . . . When the event of default
6 occurred and the debt accelerated, the new maturity for
7 the debt was November 29, 2011 [the date of the
8 bankruptcy petition]. Consequently, American’s attempt
9 to repay the debt in October 2012 was not a voluntary
10 prepayment because [p]repayment can only occur prior to
11 the maturity date.

12 Id. at 103 (internal citations and quotation marks omitted).
13 The Senior-Lien Notes holders argue AMR is inapplicable because
14 it spoke only to “prepayment” rather than “redemption.” As the district
15 court noted, the principle of AMR does not turn on the distinction
16 between “prepayment” and “redemption.” 531 B.R. at 336-37. In fact,
17 in AMR we stated that because “American’s debt was accelerated . . .
18 upon its bankruptcy filing [it] is not now voluntarily redeeming the
19 notes.” AMR, 730 F.3d at 109.
20 We also held in AMR that acceleration brought about by a
21 bankruptcy filing changes the date of maturity of the accelerated notes
22 to the date of the petition. 730 F.3d at 103. Therefore, any payment on
23 the accelerated notes following a bankruptcy filing would be a post-
24 maturity payment. And, as the First-Lien Notes holders concede, the
25 “plain meaning of the term ‘redeem’ is to ‘repay[] . . . a debt security .
26 . . at or before maturity.’” 15-1682 Br. of First-Lien Appellant 39 (emphasis
27 added). Here, Debtors’ payment was post-maturity, not “at or before”
28 maturity. But see In re Energy Future Holdings Corp., 842 F.3d 247, 255 (3d
29 Cir. 2016). Moreover, even assuming MPM’s issuance of the
30 replacement notes was a “redemption,” it would not have been “at
31 [MPM’s] option,” as required to trigger the Optional Redemption

24
 1 Clauses. Rather, the obligation to issue the replacement notes came
2 about automatically by operation of separate indenture provisions, the
3 Automatic Acceleration Clauses. A payment made mandatory by
4 operation of an automatic acceleration clause is not one made at MPM’s
5 option. See AMR, 730 F.3d at 100–01.

6 2
7 As discussed, the 2012 Indentures each contain an Acceleration
8 Clause, which calls for the acceleration of payment of the Senior-Lien
9 Notes under certain conditions constituting an Event of Default.
10 Pursuant to Section 6.01(g), one such event is MPM’s filing of a
11 voluntary bankruptcy petition. Although most Events of Default allow
12 the Senior-Lien Notes holders the option of accelerating payment, a
13 default brought about by MPM’s voluntary bankruptcy petition leads
14 to an automatic acceleration under Section 6.02.15
15 The Senior-Lien Notes holders argue that the term “premium, if
16 any” in the Acceleration Clauses requires that the make-whole premium
17 is due upon an automatic acceleration. This argument fails in light of
18 our conclusion that the Senior-Lien Notes holders are not entitled to the
19 make-whole premium under the Optional Redemption Clauses. In
20 other words, the make-whole premium is not due pursuant to the
21 Acceleration Clauses’ reference to “premium, if any,” for the simple
22 reason that the more specific Optional Redemption Clauses which grant
23 the make-whole are not triggered and thus no premium has been
24 generated. See Aramony v. United Way of Am., 254 F.3d 403, 413 (2d Cir.
25 2001) (noting that “it is a fundamental rule of contract construction that
26 specific terms and exact terms are given greater weight than general
27 language” (internal quotation marks omitted)).

15
Section 6.02 provides: “If 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.

25
 1 3
2 Finally, the Senior-Lien Notes holders argue that the lower courts
3 erred in disregarding their contractual right to rescind acceleration,16 a
4 right that if invoked would have reinstated the original maturity date
5 and thereby kept the Optional Redemption Clauses (and therefore the
6 make-whole premium) in effect.
7 AMR forecloses this argument as well. There, considering nearly
8 identical indenture language, we concluded that a creditor’s post-
9 petition invocation of a contractual right to rescind an acceleration
10 triggered automatically by a bankruptcy filing is barred because it
11 would be “an attempt to modify contract rights and would therefore be
12 subject to the automatic stay.” 730 F.3d at 102; see also id. at 102-03 (“any
13 attempt by U.S. Bank to rescind acceleration now—after the automatic
14 stay has taken effect—is an effort to affect American’s contract rights,
15 and thus the property of the estate”).
16 The Senior-Lien Notes holders again attempt to distinguish AMR
17 by relying on the fact that the acceleration provision there, unlike the
18 one here, expressly disavowed the make-whole premium. According
19 to the 1.5-Lien Notes holders, our concern in AMR was therefore with
20 not allowing the creditors “an end-run around their bargain by
21 rescission.” 15-1682 Br. of 1.5-Lien Appellant 45. This argument fails
22 because, although the provisions at issue here do not expressly disallow
23 the make-whole premium, the Optional Redemption Clauses, as we
24 have seen, achieve this result. Therefore, just as in AMR, because the
25 right to rescind acceleration here would serve as “an end-run around
26 their bargain by rescission,” the lower courts correctly concluded that
27 the automatic stay barred rescission of the acceleration of the Notes.

16
“Holders 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.

26
 1 V
2 Debtors seek dismissal of these appeals under the principle of
3 equitable mootness, a “prudential doctrine that is invoked to avoid
4 disturbing a reorganization plan once implemented.” In re Metromedia
5 Fiber Network, Inc., 416 F.3d 136, 144 (2d Cir. 2005).17 The doctrine
6 “allows appellate courts to dismiss bankruptcy appeals ‘when, during
7 the pendency of an appeal, events occur’ such that ‘even though
8 effective relief could conceivably be fashioned, implementation of that
9 relief would be inequitable.’” In re Motors Liquidation Co., 829 F.3d 135,
10 167 (2d Cir. 2016) (quoting In re Chateaugay Corp., 988 F.2d 322, 325 (2d
11 Cir. 1993) (“Chateaugay II”)). The doctrine requires us to “carefully
12 balance the importance of finality in bankruptcy proceedings against the
13 appellant’s right to review and relief.” In re Charter Commc’ns. Inc., 691
14 F.3d 476, 481 (2d Cir. 2012). With these principles in mind, we decline
15 to dismiss any of these appeals as equitably moot.
16 Where, as here, a reorganization plan has been substantially
17 consummated, we presume that an appeal of that plan is equitably
18 moot. In re BGI, Inc., 772 F.3d 102, 104 (2d Cir. 2014). That presumption,
19 however, gives way where five factors first identified in Chateaugay II
20 are met. They are, where: (i) effective relief can be ordered; (ii) relief
21 will not affect the debtor’s re-emergence; (iii) relief “will not unravel
22 intricate transactions”; (iv) affected third-parties are notified and able
23 to participate in the appeal; and (v) appellant diligently sought a stay of
24 the reorganization plan. In re Charter, 691 F.3d at 482.

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 “mooted 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 “rais[ing] the issue
. . . in their merits brief,” 15-1682 Doc. 159; 15-1771 Doc. 102.

27
 1 Although we require satisfaction of each Chateaugay II factor to
2 overcome a mootness presumption, we have placed significant reliance
3 on the fifth factor, concluding that a “chief consideration under
4 Chateaugay II is whether the appellant sought a stay of confirmation.”
5 In re Metromedia, 416 F.3d at 144. Along these lines, we concluded that
6 “[i]f a stay was sought, we will provide relief if it is at all feasible, that
7 is, unless relief would ‘knock the props out from under the
8 authorization for every transaction that has taken place and create an
9 unmanageable, uncontrollable situation for the Bankruptcy Court.’” Id.
10 (quoting Chateaugay II, 10 F.3d at 953).
11 A special emphasis on this factor is sound. Equitable mootness
12 issues only arise in earnest following a judicial determination that some
13 facet of a reorganization plan violates the Code. It is generally
14 considered inappropriately harsh to deny relief to which one is entitled
15 on the purportedly equitable ground that the unfair (or illegal) plan has
16 been put into effect, especially where a creditor took all appropriate
17 steps to secure judicial relief. In such a case, we have held that it is
18 proper to “provide relief if it is at all feasible.” Id.
19 Here, the appellants immediately objected to various provisions
20 of the Plan and promptly and consistently sought a stay in three
21 different courts. Thus their diligence is not in question. Debtors
22 nevertheless argue that these appeals should be dismissed as moot
23 because of the cascading effects of rewriting the plan were the
24 appellants to prevail. Specifically, they argue that “granting the
25 Noteholders’ relief would alter a critical piece of the Plan resulting from
26 the intense-multi-party negotiation, thereby impact[ing] other terms of
27 the agreement and throw[ing] into doubt the viability of the Plan,” and
28 that according such relief “would cause debilitating financial
29 uncertainty” to the emergent Debtor. 15-1682 Br. of Appellees 69, 71
30 (internal quotation marks omitted).
31 In light of the limited nature of the remand we order, we do not
32 believe these concerns will materialize. On remand, the bankruptcy

28
 1 court will only be called on to re-evaluate the interest to be received on
2 the replacement notes held by the Senior-Lien Notes holders. The
3 Debtors acknowledge that this might require, at most, $32 million of
4 additional annual payments over seven years. 15-1682 Br. of Appellees
5 69. The Debtors will not have to pay out the nearly $200 million they
6 assert would be required to pay the Senior-Lien Notes holders’ make-
7 whole premium, nor will any redistribution be required to the
8 Subordinated Notes holders, as to which the plan is fair. In fact, our
9 judgment allows for no redistribution other than that from the Debtors
10 to the Senior-Lien Notes holders.
11 Given the scale of Debtors’ reorganization, we are not persuaded
12 that a payment of, perhaps, $32 million in annual payments over seven
13 years, with no other redistribution from other creditors or third parties,
14 would unravel the plan, threaten Debtors’ emergence, or otherwise
15 materially implicate the concerns identified in Chateaugay II.
16 Our conclusion is supported by the findings of the lower courts,
17 which had intimate familiarity with the Debtors’ financial condition and
18 the transactions that will arise from the reorganization. Although it
19 made no determinative ruling as to equitable mootness, the bankruptcy
20 court opined that “the risk of equitable mootness is not strong here for
21 either set of movants . . . the senior secured lender set of movants and the
22 senior subordinated noteholder movants.” 15-1682 JA 4165 (emphasis
23 added). The district court agreed. 15-1682 JA 4837 (“I agree with Judge
24 Drain that the risk of equitable mootness here is not very great . . .”).
25 Debtors’ request that we dismiss these appeals as equitably moot is
26 denied.

27

28

29

29
 1 VI

2 To summarize, we conclude as follows:
3
4 1. The Second-Lien Notes stand in priority to the Subordinated
5 Notes.
6 2. The Senior-Lien Notes holders are not entitled to the make-
7 whole premium.
8 3. The lower court erred in the process it used to calculate the
9 interest rate applicable to the replacement notes received by
10 the Senior-Lien Notes holders. On remand, the bankruptcy
11 court should assess whether an efficient market rate can be
12 ascertained, and, if so, apply it to the replacement notes.
13 4. We decline to dismiss any of these appeals as equitably
14 moot.
15
16 For the foregoing reasons, we AFFIRM the District Court’s order in
17 part, with respect to the priority of the Subordinated Notes and the
18 Senior-Lien Notes holders’ entitlement to a make-whole premium;
19 REVERSE the order in part, with respect to the method of calculating
20 the interest rate on the Senior-Lien Notes holders’ replacement notes;
21 and REMAND the matter for further proceedings consistent with this
22 opinion.
23

30