Yes. The court should use a real-world market interest rate. The court explained that for big business bankruptcies, there's often a real market of lenders willing to provide loans, so it's possible to find out what a fair interest rate would be. The lower court made a mistake by using a simple 'formula' rate (prime rate + a little extra for risk), which resulted in a much lower interest rate than what other lenders were willing to offer the company. Forcing lenders to accept this low, non-market rate isn't fair. The court said that the best way to figure out the true value of a loan is to see what the market says, so it sent the case back to the bankruptcy judge with instructions to figure out the proper market rate and use that instead.

Yes, the bankruptcy court made a mistake in how it set the interest rates for the new loans because it didn't consider what rates might be available in the real world. We're sending the case back so the court can check if there's a fair market rate it could use instead. However, we agree with the lower courts that the Second-Lien lenders should be paid before the Subordinated lenders, and that the Senior-Lien lenders aren't entitled to extra money for early repayment. We decided this because, even though the agreements were a bit unclear, other evidence shows that everyone intended for the Second-Lien lenders to be paid first. As for the extra money, the bankruptcy filing changed the repayment date, so the rules for early repayment don't apply. Finally, we think it's not too late to make these changes to the plan because the lenders tried hard to pause the plan earlier, and the changes we're suggesting won't mess up the whole reorganization.

Yes. In a Chapter 11 cramdown, if an efficient market exists that can determine the appropriate interest rate for a new loan, the court must apply that market rate rather than a court-devised formula. The court reasoned that while the Supreme Court's plurality opinion in *Till v. SCS Credit Corp.* endorsed a 'formula' approach for Chapter 13 cases, its famous footnote 14 suggested that this approach might not be suitable for Chapter 11, where efficient markets for debtor financing often exist. Adopting the two-step approach from the Sixth Circuit's decision in *In re American HomePatient, Inc.*, the court held that ignoring available market rates would be a major departure from precedent dictating that market exposure is the best way to determine value. The bankruptcy court erred by categorically dismissing the probative value of market rates and applying the *Till* formula rate. The case was remanded for the bankruptcy court to ascertain if an efficient market rate exists and, if so, to apply it.

Yes, the bankruptcy court's method for determining the interest rate under the cramdown provision of Chapter 11 was flawed because it did not take into account market factors that could have provided a more equitable interest rate. 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. However, we affirm the lower courts' rulings that the Second-Lien Notes have priority over the Subordinated Notes and that the Senior-Lien Notes holders are not entitled to the make-whole premium. We conclude this because the indenture provisions, while ambiguous, are best interpreted as giving the Second-Lien Notes priority based on extrinsic evidence of the parties' intentions. Regarding the make-whole premium, we find that the acceleration of the debt due to the bankruptcy filing precludes any claim to the premium under the Optional Redemption Clauses. Finally, we decline to dismiss these appeals as equitably moot because the appellants diligently sought stays and the limited nature of our remand does not threaten to unravel the reorganization plan.

Momentive Performance Materials Inc. v. BOKF, NA

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