Chemtura Corporation

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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:
In re 	: 	Chapter 11
:
CHEMTURA CORPORATION, et al., 	: 	Case No. 09-11233 (REG)
:
Debtors. 	: 	(Jointly Administered)
:
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BENCH DECISION 1 ON CONFIRMATION
APPEARANCES:
KIRKLAND & ELLIS LLP
Attorneys for the Debtors and Debtors-in-Possession
601 Lexington Avenue
New York, NY 10022
By: 	M. Natasha Labovitz, Esq. (argued)
Craig A. Bruens, Esq.
Richard M. Cieri, Esq.
-and-
300 North LaSalle Street
Chicago, IL 60654
By: 	David J. Zott, Esq. (argued)
Nader R. Boulos, Esq. (argued)
Micah E. Marcus, Esq.
Benjamin T. Kurtz, Esq.
1 	I use bench decisions to lay out in writing decisions that are too long, or too important, to dictate in open
court, but where the circumstances do not permit more leisurely drafting or more extensive or polished
discussion. Because they often start as scripts for decisions to be dictated in open court, they typically have
a more conversational tone.
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DUANE MORRIS LLP
Conflicts Counsel for the Debtors
1540 Broadway
New York, NY 10036
By: 	Gerard S. Catalanello, Esq.
-and-
30 South 17th Street
Philadelphia, PA 19103
By: 	Lawrence J. Kotler, Esq.
AKIN, GUMP, STRAUSS, HAUSER & FELD LLP
Counsel for the Official Committee of Unsecured Creditors
One Bryant Park
New York, NY 10036
By: 	David M. Zensky, Esq. (argued)
Abid Qureshi, Esq. (argued)
Daniel H. Golden, Esq.
Philip C. Dublin, Esq. (argued)
Meredith A. Lahaie, Esq.
Jason Goldsmith, Esq.
JONES DAY
Attorneys for the Ad Hoc Committee of Bondholders
222 East 41st Street
New York, NY 10017
By: 	Richard L. Wynne, Esq. (argued)
Steven C. Bennett, Esq. (argued)
Lance E. Miller, Esq.
-and-
555 South Flower Street, 50th Floor
Los Angeles, CA 90071
By: 	Erin N. Brady, Esq.
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SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Counsel for the Official Committee of Equity Security Holders
Four Times Square
New York, NY 10036
By: 	Jay M. Goffman, Esq. (argued)
George A. Zimmerman, Esq. (argued)
Michael H. Gruenglas, Esq.
-and-
One Rodney Square
P.O. Box 636
Wilmington, DE 19889
By: 	Thomas J. Allingham, Esq. (argued)
COVINGTON & BURLING, LLP
Attorneys for Fiduciary Counselors
1201 Pennsylvania Avenue
Washington, D.C. 20004
By: 	Michael St. Patrick Baxter, Esq. (argued)
SCHULTE, ROTH, & ZABEL LLP
Attorneys for Interlachen Investcorp.
919 Third Avenue
New York, NY 10022
By: 	Lawrence Gelber, Esq. (argued)
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Bench Decision on Confirmation.................................................................................................... 1
Findings of Fact .............................................................................................................................. 2
1. Background ............................................................................................................................ 2
2. Pre-Petition Debt and Liabilities ............................................................................................ 3
3. Bankruptcy Filing .................................................................................................................. 4
4. Post-Petition ........................................................................................................................... 4
5. The Plan ................................................................................................................................. 5
6. Marketing of the Company .................................................................................................. 10
7. Valuation .............................................................................................................................. 10
A. The Experts’ Analyses .................................................................................................... 10
B. The Experts’ Methodologies ........................................................................................... 12
i. Discounted Cash Flow .................................................................................................. 13
ii. Comparable Companies ............................................................................................... 15
iii. Precedent Transactions ............................................................................................... 18
C. Valuation Conclusions .................................................................................................... 21
i. Methodology ................................................................................................................. 22
ii. DCF Analysis .............................................................................................................. 24
iii. Comparable Companies Analysis ............................................................................... 28
iv. Precedent Transactions Analysis ................................................................................ 30
v. Marketing Efforts ......................................................................................................... 33
vi. Creditors’ Preferences for Cash .................................................................................. 35
vii. Credibility .................................................................................................................. 36
D. Conclusions re: Valuation ............................................................................................... 40
8. Reasonableness of the Settlement ........................................................................................ 41
9. Good Faith ........................................................................................................................... 41
10. Ultimate Findings of Fact .................................................................................................. 42
Discussion ..................................................................................................................................... 43
1. “Fair and Equitable” under Section 1129(b)(1) ................................................................... 43
2. The Settlement ..................................................................................................................... 45
A. Standards for Approval of Settlement ............................................................................. 45
B. Settlement Analysis ......................................................................................................... 48
i. Issuance of New Common Stock .................................................................................. 48
ii. Make-Whole and No-Call Provisions ........................................................................... 49
iii. Other Settlement Components .................................................................................... 65
iv. Other Iridium Factors................................................................................................... 66
3. Other Objections .................................................................................................................. 68
A. Good Faith....................................................................................................................... 68
B. Releases ........................................................................................................................... 71
C. Dissolution of Equity Committee.................................................................................... 75
4. Miscellaneous Objections .................................................................................................... 77
Conclusion .................................................................................................................................... 77
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1
ROBERT E. GERBER
UNITED STATES BANKRUPTCY JUDGE
In this contested matter in the chapter 11 cases of specialty chemicals company Chemtura
Corporation (“Chemtura”) and its affiliates (collectively, the “Debtors”), the Debtors seek
confirmation of their chapter 11 plan (the “Plan”). Confirmation is supported by the Official
Committee of Unsecured Creditors (the “Creditors’ Committee”) and an ad hoc committee of
Chemtura bondholders (the “Bondholders Committee,”2 and together with the Debtors and the
Creditors’ Committee, the “Plan Supporters”). But confirmation is opposed by the Official
Committee of Equity Security Holders (“the Equity Committee”), and two other entities that are
equity holders or act on equity holders’ behalf.
The Equity Committee expresses several objections to confirmation. But the most
serious of them is that the Plan—which as described below, effects its distributions to
bondholders and most other creditors by means of a combination of cash and stock—undervalues
the Debtors, and that a global settlement of several constituencies’ entitlements (the
“Settlement”), upon which the Plan is based, does likewise. While the Plan proposes a
distribution to equity, the Equity Committee contends that the Plan doesn’t deliver enough—and,
as relevant to the Code’s requirements for confirmation, that each of the Settlement and the Plan
provide for payment to creditors more than in full, violating section 1129(b)’s “fair and
equitable” requirement.3
2 	Members of the Bondholders Committee hold approximately 68% of the Debtors’ bonds. See Verified
Statement Of Jones Day Regarding Representation Of An Ad Hoc Committee Of Bondholders Pursuant To
Federal Rule Of Bankruptcy Procedure 2019, ECF # 2879, at ¶ 1 (the “Bondholders R.2019 Statement”).
3 	The Equity Committee also contends that, apart from the valuation issue, an element of the settlement
allocating value to bondholders for claims based on “make-whole” premium and “no-call” provisions in
their contractual documents too generously respects the bondholders’ likelihood of success on those issues,
materially diverting value to those bondholders that would otherwise go to equity. See page 49 below.
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After an evidentiary hearing focusing nearly entirely on the disputed issues of valuation, I
find that the Debtors’ total enterprise value (“TEV”) is no higher than the valuation upon which
the Settlement was based. Under those circumstances, I find that the creditors in this case will
not be overpaid, or, more to the point, will not be paid more than in full.
As I ultimately reject most of the remaining Equity Committee contentions as well,4 the
Plan will be confirmed. The Plan Supporters may, if they wish, give me more extensive
Findings of Fact and Conclusions of Law that also cover matters that were not in controversy.
My Findings of Fact and Conclusions of Law on the basic background and disputed matters
follow.
Findings of Fact
1. Background
On March 18, 2009 (the “Filing Date”), Chemtura, a publicly-traded company, and 27 of
its affiliates filed chapter 11 petitions in this Court. 	The Debtors produce specialty chemicals,
polymer products, crop protection chemicals, and pool and spa chemicals. They have operations
in the U.S. and Canada and hold direct and indirect interests in more than 140 nondebtor
affiliates world-wide.
The Debtors’ specialty chemical products are sold to industrial manufacturing customers
for use as additives, ingredients, or intermediates; the company’s crop protection products are
sold globally through distributors and dealers to growers of produce; and the company’s pool and
spa chemicals are sold to consumers through local dealers, large retailers, and mass merchants.
4 	There are some relatively minor deficiencies in the Plan, which are fairly criticized by the Equity
Committee, and as discussed below, I sustain the Equity Committee’s objections in two respects. But in
each of those respects the Plan has been drafted to be “self-correcting,” to provide for its automatic
amendment to address any deficiencies the Court finds. See pages 71 and 75 below.
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2. Pre-Petition Debt and Liabilities
On the filing date, the Debtors had funded debt facilities with a face amount of
approximately $1.37 billion, including:
(a) $370 million outstanding under 7% unsecured notes due 2009 (the
“2009 Notes”);
(b) $500 million outstanding under 6.875% unsecured notes due 2016 (the
“2016 Notes”);
(c) $150 million outstanding under 6.875% unsecured debentures due
2026 (the “2026 Notes”); and
(d) a $350 million secured and unsecured revolving credit and letter of
credit facility with a maturity date of 2010.
In addition to their funded debt and trade debt, the Debtors also had other liabilities that
they’d need to address. When the chapter 11 cases were filed, the Debtors were paying for
remediation activities, engaged in litigation and administrative proceedings, and defending
investigations for potential environmental liabilities at nearly 200 sites in the United States.
They also faced potential fines from the U.S. EPA, 6 putative class action lawsuits, and 15 other
lawsuits, all arising from a 2004 fire at their warehouse in Conyers, Georgia.
In addition, 23 lawsuits were pending against the Debtors based upon allegations that
exposure to Diacetyl, a butter flavoring ingredient distributed by Chemtura and produced by one
of its affiliates before 2005, caused respiratory illness in numerous food industry factory
workers. And the Debtors also had significant legacy liabilities with respect to pension
obligations and medical and life insurance benefits for retired employees.
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3. Bankruptcy Filing
These debts and legacy liabilities, combined with sharp declines in demand and restricted
access to credit resulting from the global recession, forced the Debtors into reorganization in
March 2009.
4. Post-Petition
After the Filing Date, the Debtors continued to operate their businesses as debtors in
possession and improved their financial condition, particularly as a consequence of settling and
otherwise reducing claims. More than 8,300 claims filed against the Debtors were expunged or
altered, leading to a reduction in liabilities of more than $9.4 billion. The Debtors reached
settlements with all of the Diacetyl claimants; reached settlements with respect to their insurance
coverage for their Diacetyl liabilities; and put agreements into place with most of the regulatory
authorities to resolve preexisting environmental remediation liabilities. Though they disagree as
to the extent, all constituencies in this case now agree that, due in substantial part to the
resolution of these liabilities, the Debtors are once again solvent.
In addition, the Debtors’ management team formulated a Long Range Plan (the “LRP”)
by directing each business unit and cost center to, among other things, identify specific initiatives
that could drive revenue growth and reduce costs, and then to build its own projections. 5 By
aggregating these projections, management projected earnings before interest, taxes,
depreciation, and amortization (“EBITDA”) 6 for the period 2010 through 2014. A
macroeconomic assumption that drove management’s LRP was that economic activity would
5 	See Forsyth Decl. ¶ 38.
6 	A variant sometimes used was earnings before interest, taxes, depreciation, amortization, and restructuring
costs (“EBITDAR”), which would be similar but which would also take into account restructuring costs
like those that the Debtors now incur.
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recover to 2007 levels by 2011, resulting in increased earnings each year through 2014.7 The
Debtors’ actual EBITDAR through the end of the second quarter was $167 million, which was
$30 million ahead of the LRP projected EBITDAR for this period.8 But in July, EBITDAR was
“roughly on budget”,9 and in August, the Debtors missed budget by $4 million. 10 The Debtors
have not changed their projections for the year as whole.
5. The Plan
On June 17, 2010, the Debtors filed the Plan and disclosure statement (the “Disclosure
Statement”). The foundation for the Plan was the Settlement, which was negotiated between the
Debtors, the Creditors’ Committee, the Bondholders’ Committee, and the Pension Benefit
Guarantee Corporation (“PBGC”). In this settlement, the parties resolved a number of key
issues:
a. 	Debtors’ total enterprise value for Plan and distribution purposes: In
accordance with a June 4 valuation of the Debtors’ TEV prepared by Lazard
(the “Lazard June Report”), the Plan would be based on a value of
Chemtura of $2.05 billion.
b. 	Make-whole and no-call settlement: The parties agreed that the 2016 and 2026
Notes would be paid, rather than reinstated. In addition, the Debtors agreed to
pay nearly $70 million to the 2016 and 2026 bondholders to settle potential
claims for alleged breaches of the Make-Whole provision in the 2016 Notes
and the No-Call provision in the 2026 Notes. The Ad Hoc Bondholders’
7 	See Forsyth Decl. ¶ 43.
8 	See Forsyth Decl. ¶ 53.
9 	See Forsyth Decl. ¶ 54.
10 	See 9/16/10 Hrg. Tr. 111.
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Committee asserted that, if allowed in full, these claims would total
approximately $170.4 million.
c. 	Payment of certain unsecured creditors, including bondholders, with a
combination of New Common Stock and cash: The parties agreed that, as
discussed below, certain unsecured creditors, including those holding the 2016
and 2026 Notes, would be paid with a combination of common stock of a
reorganized Chemtura (“New Common Stock”) and cash, while other
unsecured creditors, such as holders of Diacetyl and environmental claims,
would be paid entirely in cash.
d. 	Settlement with the PBGC (the “PBGC Settlement”): The Plan also
contemplates, as part of the of the Global Settlement, that the Debtors will
make a one-time cash contribution in the amount of $50 million to the
Chemtura Retirement Plan on the Effective Date, and neither the Debtors nor
the Reorganized Debtors will elect to apply any portion of the $50 million
contribution to increase the Chemtura Retirement Plan’s “prefunding
balance.” In exchange for these concessions, the PBGC has agreed not to
initiate termination of the Debtors’ single-employer pension plans based on
the terms of the Debtors’ proposed restructuring.
e. 	Reimbursement of Bondholders’ professional fees and expenses: The global
settlement provided that the Debtors and Creditors’ Committee would not
object to the payment of fees and expenses to the Bondholders’ Committee up
to $7 Million.
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Although the Debtors are solvent, the Plan does not provide for a simple “waterfall”
recovery of residual equity to Chemtura’s common stockholders (“Equity”). Under the Plan, a
distribution pool (the “Distribution Pool”) will be established from which distributions will be
made to 2009, 2016, and 2026 bondholder claims, prepetition unsecured lender claims, and
“General Unsecured Claims” 11 (collectively, the “Participating Creditor Classes”). The
Distribution Pool will be funded with
(a) available cash following payment of the Diacetyl claims and
Unsecured Convenience Claims and the funding of the Environmental and
Disputed Claims Reserves,
(b) proceeds of a $100 million rights offering (“Rights Offering”), and
(c) the New Common Stock, subject to reduction of 5% in amount for
holders of interests and up to $100 million in value made available to holders of
interests in the form of the Rights Offering.12
The Participating Creditor Classes have the right to elect recovery in the form of the maximum
available percentage of cash or New Common Stock, to the extent such recovery is available
from that Distribution Pool.13
By these means, the Plan seeks to strengthen the Debtors’ balance sheet, and to materially
deleverage them. Upon the date that the Plan, after confirmation, goes effective (the “Effective
Date”), the Debtors will have approximately $750 million in funded debt, just over 50% of the
11 	The term “General Unsecured Claims” refers to claims against the Debtors other than Chemtura Canada,
and is defined to exclude certain specified unsecured claims, including those on the 2009, 2016, and 2026
Notes, Diacetyl claims, and environmental claims. See Disclosure Statement §I.C.i. Holders of general
unsecured claims against Chemtura Canada are to be paid in full in cash, rather than out of the Distribution
Pool.
12 	However, as explained below, because Equity as a class voted against confirmation, holders of interests did
not become entitled to a guaranteed 5% of the New Common Stock or the right to participate in the Rights
Offering.
13 	See Disclosure Statement § I.C.ii.
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prepetition amount.14 The Debtors’ costs of emergence, including the cash required for
distribution in settlement of certain claims, will be financed primarily from an Exit Financing
consisting of a $275 million senior secured asset-based revolving credit facility, a $295 million
senior secured term loan, and $455 million of unsecured senior notes due 2018. 	Under the plan,
reorganized Chemtura will issue up to 100 million shares of New Common Stock for distribution
on the Effective Date.15
Because the Debtors are solvent, creditors will be left unimpaired, reinstated, or paid in
full. They also will get postpetition interest. Diacetyl claims, all of which have been resolved by
settlement, will be paid in full in cash.16 The Plan creates a reserve (the “Environmental
Reserve”), to be funded wholly in cash, for federal or state environmental law claims against the
Debtors held by governmental units that have not yet been settled or received requisite regulatory
approval.17 The Plan also establishes a reserve (the “Disputed Claims Reserve”) for the benefit
of holders of general unsecured claims that remain disputed as of the Effective Date. To the
extent such claims are allowed after the Effective Date, they’ll be paid out of the Disputed
Claims Reserve, funded by a mixture of New Common Stock and cash.18
If Equity as a class had voted in favor of the Plan, then equity holders would have had a
guaranteed recovery of 5% of the New Common Stock and the right to participate pro rata in the
Rights Offering. In addition, Equity would not have borne the risk that the eventual amount of
allowed claims would exceed the Debtors’ estimates. But in balloting, Equity voted against the
Plan. Thus, if I confirm, Equity will receive distributions of whatever cash and New Common
14 	See Disclosure Statement § I.B.
15 	See Disclosure Statement § VIII.D.xi.
16 	See Disclosure Statement § VIII.B.iii.j and § VIII.I.
17 	See Disclosure Statement § VIII.B.iii.k and § VIII.H.
18 	See Disclosure Statement § VIII.G.
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Stock is available after all allowed claims have been paid in full, and the Environmental and
Disputed Claims Reserves have been fully funded in the amounts I ultimately require.19
On August 9, 2010, I authorized the Debtors to enter into a Plan Support Agreement with
the Creditors’ Committee and certain of the members of the Ad Hoc Bondholders’ Committee.20
The Plan Support Agreement (“PSA”), which embodies the terms of the Settlement, requires its
creditor signatories to vote in favor of the Plan.
After the balloting came in, the Plan was accepted by all creditor classes, with votes
ranging from 93% to 100% in amount, and 91 % to 100% in number. But it was rejected by the
Equity, with acceptances of only 26% in amount.21
19 	See Disclosure Statement § I.C.ii. Additionally, should the Plan Reserves exceed the amount of
environmental and disputed claims ultimately allowed, the excess value in the Reserves will also fall to
Equity.
20 	See Order, ECF #3527.
21 	See Klamser and Kjontvedt Voting Results Declarations, ECF # 3955 and # 3956, respectively.
Class
Name
Class Description 	Amount
Accepting
Number
Accepting
1 	Prepetition Secured Lender Claims 	$26,617,022.27
(100%)
3
(100%)
4a 	General Unsecured Claims against Chemtura
Corp.
$52,777,334.84
(93%)
138
(91%)
4b 	General Unsecured Claims against Subsidiary
Debtors
$15,098,122.32
(99%)
109
(93%)
5 	Prepetition Unsecured Lender Claims 	$126,867,300.87
(100%)
8
(100%)
6 	2016 Notes Claims 	$422,441,690.00
(99.8%)
126
(99.2%)
7 	2009 Notes Claims 	$330,169,000.00
(99.5%)
119
(98.3%)
8 	2026 Notes Claims 	$136,029,000.00
(95.7%)
71
(97.3%)
10 	Diacetyl Claims 	$52,210818.00
(97%)
364
(99%)
11 	Environmental Claims 	$1,694,983.50
(100%)
6
(100%)
13a 	Interests in Chemtura Corp. 	42,062,054.6497
(25.94%)
N/A
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6. Marketing of the Company
After the Debtors issued the Plan and Disclosure Statement, but before the time for
voting on the Plan, the Equity Committee, in the hope of having a fully-funded alternative plan,
marketed Chemtura to try to secure investors willing to purchase equity in it. Although the
Debtors had plan exclusivity, and on July 21, 2010 defeated an Equity Committee motion to end
exclusivity, they cooperated in the Equity Committee’s marketing efforts, in a manner that I find
to be in good faith and fully satisfactory.
A total of 19 parties were contacted, and the Debtors signed non-disclosure agreements
with 7 investors, including certain members of the Equity Committee themselves. The
presentations made to these potential investors relied on valuation reports prepared by UBS in
June 2010 (the “Paulson Presentation”),22 which estimated the TEV of Chemtura to be between
$2.2 and $2.7 billion.23 The Equity Committee’s attempts to solicit investments at that value, or
any other, were ultimately unsuccessful.24 That fact, along with others, informs my finding,
discussed below, that the Debtors’ TEV is not as high as the Equity Committee contends.
7. Valuation
A. The Experts’ Analyses
Before the valuation hearing (and in the Debtors’ case, before the Settlement was
reached), the Debtors and Equity Committee each secured expert opinions as to the Debtors’
TEV, reflected first in expert reports and then in testimony before me. 25 The Debtors’ analysis,
22 	See Paulson Presentation, Debtors’ Exhibit 70.
23 	See 9/21/10 Hrg. Tr. 49-51.
24 	See 9/21/10 Hrg. Tr. 53-57.
25 	The testimony, consistent with my Case Management Order #1, ECF # 73 and my historic practice in cases
where the evidence is heavily historic, numeric, and/or technical, was heard by declaration on direct, and
live on cross, redirect, and anything thereafter. Each expert witness made reference to his firm’s expert
report in his testimony, with the Equity Committee incorporating it by reference in direct testimony and the
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dated August 29, 2010 and also prepared by Lazard (the “Lazard Expert Report”) estimated
the Debtors’ TEV to be in a range of $1.9 billion to $2.2 billion, with a midpoint at $2.05
billion.26 The Equity Committee’s analysis, expressed in a report prepared by UBS on August
29, 2010 (the “UBS Expert Report”), estimated the Debtors’ TEV to be in a range of $2.3
billion to $2.6 billion, with a midpoint of $2.45 billion.27
Both the Lazard and UBS analyses employed three standard valuation methodologies:
(i) discounted cash flow (“DCF”);
(ii) comparable companies (“Comparable Companies”); and
(iii) precedent comparable transactions (“Precedent Transactions”).
Lazard prepared a chart, colloquially referred to as the “football field,” upon which the valuation
ranges that resulted from each methodology appeared, and which showed a range near the
middle where the individual methodology results, for the most part, overlapped. This area of
overlap correlated to Lazard’s conclusion of that valuation range of $1.9 billion to $2.2 billion.28
The UBS Report, under UBS policy, did not include a football field.29
Debtors referring to it and pasting into the direct testimony declaration significant portions of the report’s
contents. See Smith Decl. ¶ 3; Aronson Decl. ¶ 4, 11, and in many other places. The direct testimony came
in without objection, and the expert reports were also offered into evidence, without objection. Though the
expert reports themselves may technically have been hearsay, I wasn’t asked to rule on whether they were,
or otherwise to rule that the expert reports were inappropriate for consideration after the various parties’
opportunities to cross-examine the witnesses. And as both sides relied on testimony and the expert reports
essentially interchangeably, I’ll do likewise.
26 	See Lazard Expert Report at 1. The Lazard Expert Report was prepared by Daniel Aronson.
27 	See UBS Expert Report at 4. The UBS Expert Report was prepared by Steven Smith and Ajay Singh.
28 	See Lazard Expert Report at 5.
29 	See 9/20/10 Hrg. Tr. 220; 9/21/10 Hrg. Tr. 87. The Paulson Presentation, also prepared by UBS, did
contain a football field representation of value ranges. See Debtors Exhibit 70 at 1. UBS’s second witness
differentiated between the Paulson Presentation and more “formal valuations” like the UBS Expert Report,
where football fields were not permitted. See 9/20/10 Hrg. Tr. 220; 9/21/10 Hrg. Tr. 87.
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The Creditors’ Committee also obtained expert analysis as to TEV. It secured an expert
opinion from its financial advisor, Houlihan, Lockey, Howard & Zukin, confirmed in a report
dated August 29, 2010 (the “Houlihan Expert Report”), and thereafter, live testimony.
The Houlihan analyses did not provide a valuation of Chemtura, but instead critiqued the
analyses of Lazard and, particularly, UBS. Houlihan made a number of observations, many of
which I ultimately came to agree with, the most significant of which were that:
(a) Chemtura had historically traded at a discount relative to its peers prior
to the bankruptcy, and that any valuation would require a discount as a
consequence; and
(b) the Debtors’ admittedly aggressive projections in the LRP were overly
aggressive, because they were based on assumptions of near-term economic
growth that were not supported by recent evidence, and that any valuation of
Chemtura that assumed that the Debtors would exceed their 2010 EBITDA
forecast or meet their projections for 2011-2014 would, without appropriate risk
adjustments, overstate the value of the Debtors.30
B. The Experts’ Methodologies
Though Lazard and UBS implemented their methodologies in different ways (and
seemingly modest differences in assumptions, comparables, and means of implementation
resulted in substantial differences in valuation), their basic methodologies were largely similar.31
Each, as noted, gave at least some attention to DCF, Comparable Companies, and Precedent
Transactions. And they applied those valuation techniques in largely similar ways—though UBS
30 	See Cerimele Decl. ¶ 5. The Houlihan Expert Report was prepared by Christopher Cerimele.
31 	See Equity Comm. Obj. Br. at 20 (“What is remarkable about the competing valuations presented by the
Equity Committee and the Debtors’ respective experts is how similar they are, in most respects.”)
(emphasis in original).
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did not compute actual valuations based on the latter two means, and instead used them only as a
check on its DCF conclusion.
i. Discounted Cash Flow
The DCF valuation methodology estimates the net present value of a company by:
(i) projecting unlevered free cash flows over a given fixed forecast period,
then discounting those cash flows back to the present using an estimated discount
rate based upon the company’s weighted average cost of capital (“WACC”) and
(ii) deriving the value of all unlevered free cash flows beyond the explicit
forecast period—the “terminal value”—and then discounting that terminal value
back to the present by applying the estimated discount rate.32
The enterprise value is determined by adding the numbers derived from (i) and (ii).
Translating that technical jargon into more easily understood terms and applying it here,
the two DCF analyses computed TEV by adding the present value of two assumed future cash
flow streams:
(1) the cash flow projected for each of years during which the LRP made a
specific projection, and
(2) the cash flow projected for the period thereafter, as derived from a
figure—the terminal value—that was used as a basis to capture those later cash
flows.
32 	See Singh Decl. ¶ 12. See also Aronson Decl. ¶ 29 (“the DCF analysis derives an estimated TEV using a
combination of projected [unlevered free cash flows] and a terminal value at the end of the projected
period, each discounted to a present value based on the company’s weighted average cost of capital….”).
The terminal value captures the value of all cash flows after the period for which particular cash flows were
projected, here after 2014.
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With respect to the years for which there was a specific forecast, Lazard and UBS, for the
most part,33 used the annual future cash flows from 2010 to 2014 that had been projected in the
LRP. 34 The two also used similar discount rate rates.35 In their terminal value calculations,
however, the two reports differed, most significantly, in the EBITDA value to which the
multiples were applied.
To calculate terminal value, UBS applied its multiples to the EBITDA for the last year of
the forecast period (2014), or $528 million, taken from the Debtors’ LRP.36 Discount rates
between 11.6% and 13.6% were applied.37 Using this method, UBS calculated a DCF range for
TEV between $2.47 billion and $2.927 billion.38
Lazard calculated terminal value by applying multiples of a higher 6.5x to 7.5x based on
an analysis of enterprise values and 5-year and 3-year average EBITDA for the peer group to a
mid-cycle or normalized EBITDAR of $404 million. 39 The mid-cycle EBITDAR was based on
the average of 2009 through 2014 EBITDAR, which included both actual results and forecasted
EBITDAR from the LRP. 40 Lazard applied discount rates between 11.75% and 13.75% and
calculated the Debtor’s TEV range to be between $2.175 billion and $2.570 billion.41
33 	I say “for the most part” by reason of the “6+6” technique used for 2010. See page 16 below.
34 	See Singh Decl. ¶ 13; Aronson Decl. ¶ 29.
35 	See Lazard Expert Report at 16 (applying discount rates between 11.75% and 13.75%); UBS Expert Report
at 8 (applying discount rates between 11.6% and 13.6%).
36 	See Aronson Decl. ¶ 66; UBS Report at 8.
37 	See UBS Expert Report at 8.
38 	See UBS Expert Report at 8.
39 	See Aronson Decl. at ¶ 30-31; See 9/16/10 Hrg. Tr. 208.
40 	See Lazard Expert Report at 7.
41 	See Aronson Decl. at ¶ 37-38.
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Lazard’s witness explained that a multiple of mid-cycle EBITDAR was used to account
for the cyclical nature of the Debtors’ earnings and cash flows after the projection period.42 But
UBS and Lazard debated the extent of the Debtors’ cyclicality, which could affect the
appropriate terminal value calculation. UBS contended that Lazard’s use of a normalized
EBITDAR inappropriately drove the present worth of the terminal value down.43 Conversely,
Lazard contended that UBS’s use of the EBITDAR for the final year, at a level never before
achieved in Chemtura’s history, caused the UBS DCF analysis to significantly overstate value.44
ii. Comparable Companies
The comparable company analysis estimates the value of a firm by taking the value of
comparable peer firms and using their values as an indicator of the subject company. Values are
standardized using one or more common variables such as revenue, earnings, or cash flow, with
the expert then applying a multiple of the financial metric or metrics that yields the market’s
valuation of these comparable companies.45 A key element in this analysis is the choice of the
“comparables”—the selection of companies that are most comparable to the subject firm or its
specific businesses.46 Each of the Lazard and UBS expert reports gave at least some attention to
both consolidated and sum-of-the-parts comparable company analyses. While the consolidated
approach looks at comparables for the entire company as a whole, a “Sum-of-the-Parts” analysis
uses similar techniques for individual lines of the Debtors’ businesses and then aggregates those
results to estimate overall TEV.
42 	See Aronson Decl. ¶ 30.
43 	See 9/20/10 Hrg. Tr. 151. See also Singh Decl. ¶ 20.
44 	See Aronson Decl. ¶ 66.
45 	See Singh Decl. ¶ 61; Aronson Decl. ¶ 41.
46 	See Singh Decl. ¶ 61; Aronson Decl. ¶ 42.
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For the consolidated analysis, UBS examined 4 categories of multiples (LTM, and 2010,
2011 and 2012 Estimated EBITDAR) for each of 11 domestic companies in its peer group and
calculated the mean multiple for each category.47 Again, UBS did not actually calculate a TEV
range from these mean multiples; it back-calculated multiples from its overall Chemtura TEV
range of $2.3 million to $2.6 million using LTM and actual and projected EBITDAR to
demonstrate the reasonableness of its estimated DCF TEV. 48 The UBS Report did provide an
implied valuation range from its Sum-of-the-Parts analysis, which was $2.394 billion to $2.789
billion.49
Lazard’s trading peer group contained 15 companies—10 domestic and 5 foreign.50
Lazard analyzed 5 categories of multiples on a full-company basis: multiples based on 2010 and
2011 Estimated EBITDAR, 2010 and 2011 Estimated EBITDAR less capital expenditures,51 and
2010 Estimated EBITDAR, taking also into account underfunded pension and OPEB obligations,
which Lazard referred to as “EBITDARP.” 52 Lazard also performed a Sum-of-the-Parts
analysis.
In its various EBITDAR computations, Lazard, like UBS, used “6+6” figures—actual
results for the first 6 months of 2010 and the LRP projections for the last 6 months—for the three
47 	See UBS Expert Report at 6.
48 	See 9/20/10 Hrg. Tr. 229-230; 9/21/10 Hrg. Tr. 52.
49 	See UBS Expert Report at 7.
50 	See Lazard Expert Report at 23.
51 	Lazard examined these because “EBITDA less capital expenditures provides insight into each [company’s]
cash flow generating capability adjusted for capital reinvestment.” Aronson Decl. ¶ 45.
52 	This was important, in Lazard’s view, because EBITDA would not take into account the full cash outflows
relating to pension and OPEB liabilities; pension and OPEB underfunding would be reflected in a lower
market value of the company (which would also cause a lower trading multiple); and including
underfunded pension and OPEB liabilities in enterprise value as a “debt-like” obligation would “normalize”
the multiples. See Aronson Decl. ¶ 46. I found no reason to quarrel with this view, or Lazard’s use of this
method, but consideration of this methodology ultimately did not have a material effect on my valuation
findings, discussed below.
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2010 analyses. Lazard applied the derived range of multiples to “6+6” figures for the three 2010
analyses, and to LRP projections for the 2011 analyses.53
Three differences in those analyses are worthy of note. First, while UBS used foreign
comparables in its Sum-of-the-Parts analysis but only domestic comparables in its consolidated
company analysis, Lazard included foreign comparables in both.54 UBS contended that the
foreign companies were, on the whole, inappropriate comparables for Chemtura, and noted that
Lazard’s inclusion of foreign companies (which all had EBITDA lower than any of the domestic
companies) drove down the mean multiples and reduced the derived TEV for Chemtura by $198
million to $237 million.55 However, Lazard and Houlihan contended that any analysis could not
exclude foreign companies that were otherwise comparable. And they noted that in the period
2005 to 2008, Chemtura on average traded below its full peer group—including Lazard’s foreign
and domestic comparables. 56
Second, UBS’s list of comparables included DuPont and PPG Industries, but not Solutia,
while the Lazard comparables contained the opposite.57 Lazard and the Creditors' Committee
argued that the inclusion of DuPont and PPG, which are much larger than Chemtura and not
specialty chemical companies, inappropriately inflated the multiples that UBS derived from the
analysis,58 and that the failure to include Solutia, an assertedly very similar company, did
likewise.59
53 	See Lazard Expert Report at 5, 23.
54 	See Singh Decl. ¶ 62-66; Aronson Decl. ¶ 70.
55 	See Singh Decl. ¶ 63.
56 	See Lazard Expert Report at 22; Cerimele Decl. ¶ 30-31 and Exhibit B.
57 	See Lazard Expert Report at 23; UBS Report at 6.
58 	See Aronson Decl. ¶ 71; Cerimele Decl. ¶ 19, 23.
59 	See Aronson Decl. ¶ 72.
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Third, the Lazard and UBS analyses differed with respect to the year chosen for their
Sum-of-the-Parts analysis. Lazard derived multiple ranges from select comparable companies’
business units, then valued unallocated corporate overhead using a weighted average multiple
calculated on the basis of each business unit’s contribution to total to 2010 6+6 EBIDTAR. 60 Its
estimated TEV range from this analysis was $1.88 billion to $2.23 billion.61 By contrast, UBS
pegged its valuations of the Debtors’ component businesses on multiples of 2011 EBITDAR.
UBS found Lazard’s reliance on 2010 actual and projected numbers to be flawed, contending
that generally by Q3, market valuations would be driven by projections for the following year,
and that 2010 was a transition year for the Debtors, with uniquely depressed EBITDAR
numbers. 62
iii. Precedent Transactions
Precedent Transaction methodology applies multiples derived from the purchase prices of
comparable companies in past M&A transactions to the subject firm’s LTM earnings, cash flow,
or EBITDA to determine a range of TEV. 63 This method requires qualitative judgments in light
of the unique circumstances of each precedent transaction and inherent differences between the
precedent acquired companies and the subject company.64 In considering the circumstances as to
the various precedent transactions, the parties debated the extent to which a Precedent
Transactions analysis would appropriately take into account the financial environment at the
present time.
60 	See Lazard Expert Report at 25; Aronson Decl. ¶ 52.
61 	See Lazard Expert Report at 25.
62 	See UBS Expert Report at 7; Singh Decl. ¶ 55-57.
63 	See Aronson Decl. ¶ 53; Singh Decl. ¶ 44.
64 	See Aronson Decl. ¶ 54.
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The Lazard Expert Report analyzed 14 transactions between 2004 and 2010, all between
$1 billion and $10 billion in value.65 But over this time, there were dramatic changes in the
global economy and capital markets, as evidenced most dramatically by the economic and
financial environments after the reversals suffered by Bear Stearns and Lehman Brothers.
Considering these changes to be highly material, Lazard “reviewed many transactions and
presented transactions from before the Lehman Brothers bankruptcy in [its] Report, but []
ultimately relied upon” the transactions that occurred after September 15, 2008, the day Lehman
Brothers filed for chapter 11.66 Three transactions fell into this category: the K+S acquisition of
Morton, the Bain acquisition of Styron Plastics, and the BASF acquisition of Cognis.67
The mean EBITDA multiple for these three transactions was 6.2x.68 Using that mean as
a midpoint, Lazard determined the appropriate multiple range for Chemtura to be 5.75x to 6.75x
LTM estimated EBITDAR. 69 After applying this multiple range to LTM EBITDAR as of
September 30, 2010, or $342 million, Lazard estimated the Debtors’ TEV to be between $1.970
billion and $2.315 billion. 70
The UBS Expert Report considered 19 transactions between 2005 and 2009, which had a
range of values between $290 million and $18.666 billion and a mean EBITDAR multiple of
9.7x. 71 But UBS did not actually calculate a TEV range from these mean multiples. Instead, as a
way to demonstrate the reasonableness of its TEV range, it took its estimated TEV range for the
65 	See Lazard Expert Report at 28.
66 	Aronson Decl. ¶ 79.
67 	See Lazard Expert Report at 28. These three transactions were separated from the earlier transactions by a
dotted line.
68 	See Lazard Expert Report at 28. The multiple for the BASF-Cognis transaction, which I find to be the
closest comparable transaction in both nature of subject company and closeness in time, was exactly 6.2x.
69 	See Aronson Decl. ¶ 27.
70 	See Lazard Expert Report at 5.
71 	See UBS Expert Report at 9.
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Debtors of $2.3 million to $2.6 million, and, using an LTM EBITDAR of $331 million, back-
calculated EBITDAR multiples of 6.9x to 7.9x.72 That back-calculated multiple range of 6.9x to
7.9x was lower than the Precedent Transaction analysis mean of 9.7x LTM EBITDAR, which
caused UBS to believe that its TEV did not exceed the actual value of Chemtura.73
With respect to their consideration of precedent transactions, the two reports differed
materially in their lists of transactions considered. Most notably, UBS included many
transactions pre-dating the Lehman bankruptcy and the change in the financial climate, while
Lazard did not. Additionally, the Cognis transaction was omitted from the UBS Report and the
Nufarm transaction was omitted from the Lazard report. UBS stated that the Cognis transaction
was omitted because, as of the time of the report (and of the hearing), the Cognis deal had not
closed.74 Thus, the most recent (and only “post-Lehman”) transaction included in the UBS
Expert Report was the Sumitomo acquisition of a 20% interest in Nufarm. Lazard explained that
it excluded the Nufarm transaction from its Precedent Transactions analysis because Nufarm was
only an appropriate comparable for the Debtors’ AgroSolutions business, but not for Chemtura
on a whole, and because Sumitomo was a “white knight” in that transaction.75
However, Lazard and Houlihan contended that the heavy reliance by UBS on pre-
Lehman transactions, entered into before the financial markets crashed, was a serious flaw.
Cutting in the other direction, however (though the parties would differ as to the extent),
were differences in the Precedent Transactions analyses between the Lazard Expert Report
(prepared in August) and the earlier Lazard June Report. As mentioned above, in its Expert
72 	See UBS Expert Report at 9. See also 9/20/10 Hrg. Tr. 226-27; 9/21/10 Hrg. Tr. 52.
73 	See UBS Expert Report at 9.
74 	See 9/20/10 Hrg. Tr. 209-210.
75 	See Aronson Decl. ¶ 80.
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Report, Lazard relied on 3 post-Lehman Bankruptcy transactions— Morton Inc. (in April 2009),
Styron Plastics (in March 2010), and Cognis (in June 2010)—which Lazard placed above a
dotted line in the reverse chronologically ordered table in the report.76 The BASF acquisition of
Ciba Inc. (in September 2008) and the Ashland acquisition of Hercules (in July 2008) fell below
that line. In the earlier June Report, however, Lazard had focused on 4 precedent transactions
from 2008 forward, including the Ciba and Hercules transactions, along with the Styron and
Morton acquisitions.77 If the Ciba and Hercules transactions, with multiples of 7.8x and 9.0x
respectively, had been included in the August 29 analysis, the average non-pension adjusted
multiple since 2008 would have been 7.6x—higher than the average non-pension adjusted post-
Lehman EBITDA multiple of 6.8x calculated in the Lazard Expert Report.78 UBS contended
that this was a methodology flaw, tending to drive Lazard’s TEV computation down—or, more
to the point, which if absent would have caused Lazard TEV computation now to be higher.
C. Valuation Conclusions
If I were required to find a specific valuation for the Chemtura Debtors here, I think that,
based on the foregoing and the additional factual analysis discussed below, any valuation would
be at the low end of the Lazard range.79 But for the purposes of this controversy, I don’t need to
find an exact valuation. To determine that the Plan does not violate section 1129(b)’s “fair and
equitable” requirement by paying creditors more than in full, I need only find that the Debtors’
TEV doesn’t exceed the TEV underlying the Settlement.
76 	See Lazard Expert Report at 28. In other words, the most recent transactions were shown first, and on top.
77 	See Lazard June Report at 27. In the June Report, the dotted line separated 2007 and earlier transactions
from post-2008 transactions. Hercules and Ciba were above the line. The BASF acquisition of Cognis was
not included in Lazard’s June Report because it was not announced until later in June.
78 	See Singh Decl. ¶ 46-50 and Appendix I, 4. Lazard’s pension adjusted average EBITDA multiple was 6.2x
in the June 4 report, and would have been 7.0x in the August report had Ciba and Hercules been included.
79 	Or, putting it differently, the $2.05 billion midpoint of the Debtors’ proposed TEV range (and the TEV
upon which the Settlement was based) represents the high-end of the Debtors’ actual TEV.
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For the reasons set forth below, I so find. I do so for the following reasons.
i. Methodology
As previously indicated, Lazard’s valuation presented a TEV in the range of from $1.9 to
$2.2 billion, with a midpoint of $2.05 billion. The Settlement was based on that midpoint
valuation. Lazard’s valuation conclusion was reached after consideration of three traditional
methods—value implied by consideration of: (1) discounted cash flow (2) comparable
companies; and (3) prices in precedent comparable transactions.
The UBS valuation, by contrast, presented a TEV in the range of from $2.3 to
$2.6 billion, with a midpoint at $2.45 billion, approximately 20% higher than the Lazard
valuation. But the UBS valuation was reached by computation only of DCF, which, as discussed
below, is subject to projections under an aggressive LRP in an uncertain economic environment.
In such an environment, I think that Precedent Transactions (if in that same environment and if
the sample size wasn’t too small) and, especially, Comparable Companies, would provide a more
persuasive indicator of value, and I was surprised that these latter two techniques did not play a
greater role in the UBS analysis. Comparable Companies and Precedent Transactions analyses
were employed, but not to reach separate valuations that would then be considered to provide a
composite or blended valuation. Instead, they were used only as a species of check—sometimes
referred to as a “sanity check”—on the valuation UBS arrived at by its use of DCF.
Although in holding valuation hearings before, I’ve seen experts come to valuation
conclusions using several different methodologies, and then come to various weighted averages
for the final valuation,80 that was not done here. Instead, Lazard prepared the “football field”
80 	See, e.g., In re DBSD North America, Inc., 419 B.R. 179 (Bankr. S.D.N.Y. 2009) (“DBSD”), aff’d
2010 WL 1223109 (S.D.N.Y. 2010), appeal pending, No. 10-1175 (2d Cir., appeal filed Apr. 1, 2010):
Each expert also weighted the values produced by the three
methodologies differently. Mr. Henkin effectively weighted the
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chart, described above and pictured below, reflecting the general overlap in valuation ranges
derived from its various methodologies, and then submitted an essentially subjective valuation
consistent, for the most part,81 with the overlap.
SUMMARY OF VA LUATION CONCLUSIONS
METHODOLOGY 	ENTERPRISE VALUE RANGE 	DESCRIPTION
 Management free cash flow forecast discounted at 11.75% - 13.75%
 Exit Multiple: 6.5x – 7.5x on mid-cycle EBITDAR
 Implies a perpetuity growth rate of 1.0% to 4.2%
 2010E “6+6” EBITDAR: $330 million
 Multiple Range: 5.25x – 6.25x
 2010E “6+6” EBITDAR less Cap. Ex.: $210 million
 Multiple Range: 8.0x – 9.0x
 2011E EBITDAR: $395 million
 Multiple Range: 4.75x – 5.75x
 2011E EBITDAR less Cap. Ex: $252 million
 Multiple Range: 7.5x – 8.5x
 Various multiples range from 5.25x – 8.5x 2010E “6+6” EBITDAR
 LTM September 30, 2010E “9+3” EBITDAR: $342 million
 Multiple Range: 5.75x – 6.75x
 Management free cash flow forecast discounted at 11.75% - 13.75%
 Exit Multiple: 6.5x – 7.5x on mid-cycle EBITDARP
 Implies a perpetuity growth rate of 0.3% to 3.5%
 Tax-Adjusted Obligations: $279 million(a)
 2010E “6+6” EBITDARP of $343 million
 Multiple Range: 5.75x – 6.75x
 Tax-Adjusted Obligations: $279 million(a)
Discounted Cash Flow
EBITDAR
EBITDAR –
Cap Ex
EBITDAR
EBITDAR –
Cap Ex
2010E
EBITDAR
2010E
2011E
Sum-of-the-
Parts
Precedent Transaction
Comparable Company
Consolidated
$2,175 	$2,570
$2,470	$2,055
$1,730
$1,690
$1,680
$1,875
$1,890
$1,880
$2,060
$2,035
$2,270
$2,145
$2,230
$1,890
$2,315	$1,970
$1,400 	$1,600 	$1,800 	$2,000 	$2,200 	$2,400 	$2,600 	$2,800
Adjusted Discounted Cash Flow (a)
EBITDARP
(a) Assumes $429 million of pension and OPEB liabilities, which is tax-effected at a 35% assumed tax rate
Note: “6+6” EBITDAR is defined as 6 months of actual results (January – June 2010) plus 6 months per the LRP budget (July – December 2010); “9+3” EBITDAR defined as 9 months of
actual results (October 2009 – June 2010) plus 3 months per the LRP budget (July – September 2010)
While Lazard developed a valuation range using individual valuations derived from
several different methodologies, UBS did not do so. UBS computed valuations like Lazard’s
only by DCF. The Creditors’ Committee noted this in its briefing on this motion.82 Though I
Trading Comparables Analysis at 90%, and the other two
methodologies at 5% each. By contrast, Mr. Nabholz weighted the
Trading Comparables Analysis at 20%, and the other two
methodologies at 40% each.
DBSD, 419 B.R at 195 (footnotes deleted).
81 	The result using EBITDAR-Capital Expenditures did not fall within the range. But it fell below it, and any
error in failing to rely on it more heavily would be in the Equity Committee’s favor.
82 	See Creditors’ Comm. Reply Br. at ¶ 21 (“Although UBS claims to have applied the same widely-accepted
methodologies as the Debtors’ expert, UBS did not even calculate the Debtors’ enterprise value based upon
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wouldn’t express the thought in quite the way that the Creditors’ Committee did, I agree with the
Creditors’ Committee’s underlying point: the difference in technique makes the Lazard analysis
superior.
ii. DCF Analysis
As previously mentioned, the DCF valuations by each of Lazard and UBS were for the
most part predicated on the cash flows anticipated in management’s LRP, which was
unchallenged by UBS or the Equity Committee. 83 The LRP assumed that a general
macroeconomic recovery to pre-recessionary levels would occur in 2011, which would result in
further earnings improvements through 2014. It projected EBITDAR of $528 million in 2014,
after five years of increasing EBITDA, without any drops, or even flatness, each year.
The Debtors’ CFO, whom I found competent and credible, described the Long Range
Plan as “aggressive,”84 and I so find. The Long Range Plan called for levels of performance, for
years after 2011, that had never before been achieved at Chemtura. 85 And it was prepared in the
context of an economy that, while certainly improved since 2008 (when the U.S. nearly faced a
depression), is improving only slowly. The Equity Committee’s expert conceded that UBS has
lowered its GDP forecasts for 2010 and 2011.86 I don’t have any greater ability than the political
either the comparable-company or precedent-transactions analyses. Instead, UBS merely shows a range of
comparable-company and precedent-transaction multiples that UBS argues are supportive of the selected
multiple range applied in its discounted cash flow (“DCF”) analysis. In other words, UBS worked
backwards.”).
83 	While both Lazard and UBS seemingly started with the assumption that they’d work off the projections of
the Long Range Plan, each did not do so wholly faithfully, making adjustments in each case. Lazard used
6+6—actual results for the first six months of 2010, and the Long Range Plan for the last six months. UBS
did the same. Although the wisdom of the use of 6+6 is subject to fair debate (especially since results were
flat in July and below plan in August, but these additional actual results were not taken into account), the
use of 6+6 by each of Lazard and UBS resulted in no differences between them in this regard.
84 	See Forsyth Decl. ¶ 60; 9/16/10 Hrg. Tr. 136.
85 	See 9/16/10 Hrg. Tr. 137; 9/16/10 Hrg. Tr. 256. See also Aronson Decl. ¶ 24.
86 	See 9/20/10 Hrg. Tr. 142.
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and economic pundits to predict how quickly the economy will improve, and I don’t think that I
should do so. But I can and do find that since the Debtors’ Long Range Plan is already
aggressive, and since the speed (and in the views of some, the fact) of the economic recovery is
uncertain, it is inappropriate to be as confident as the Equity Committee is as to future growth in
the American economy and increasing Chemtura EBITDA growth.
The Lazard and UBS DCF analyses both assume continuously increasing growth, but the
effect of that assumption is magnified in the UBS analysis, which uses the $528 million
EBITDAR in the last year, 2014, as the basis for determining terminal value. I take it as true, as
the Equity Committee and UBS contended, that, for the terminal value calculations, using the
cash flows in the last projected year is not just common, but the more traditional approach (at
least before considering the cyclicality of the company’s business). But that reality underscores
the importance of the projections that get us the $528 million in expected EBITDAR for that last
year. The extent to which that $528 million is an appropriate benchmark for gauging future
performance (and hence terminal value) depends upon both the confidence that one has in
expectations as to the Debtors’ future economic growth as well as the extent to which the
expectations would be subject to cyclical variations.
I’ve previously noted that the Debtors’ projections are aggressive, and that I have
uncertainty as to the country’s—apart from Chemtura’s—economic prospects over the next five
years. This uncertainty cuts materially in favor of the Lazard view, which doesn’t place as much
reliance on the unprecedented EBITDA for 2014.
However, I agree with Lazard only in part with respect to how to deal with cyclicality.
Determining the appropriate Terminal Value may be a challenge in cyclical businesses, as the
projected period might end at various points near the top, bottom, or middle of the business
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cycle, and using the cash flows at that point might or might not provide a reasonable basis for
projected cash flows going forward. I didn’t understand anyone in this case to question the view
of NYU business professor Aswath Damodaran that for cyclical businesses, taking the business
cycle into account makes for a better analysis—that “trying to forecast the next cycle is not only
futile but dangerous[,] and that it is far better to normalize earnings and cash flows across the
cycle.”87 But the experts had different views on the extent of cyclicality of the Debtors’
business, and how to “normalize” their projected cash flows for years after 2014.
Lazard considered it appropriate to regard the Debtors as cyclical, requiring their actual
and projected cash flows—which went down from 2007 to 2009 and then were projected to go
up to 2014, 88 with a graph resembling a hockey stick—to be normalized to account for the
business cycle. Lazard did that by computing 3-year and 5-year averages for EBITDA, which at
least seemingly were not necessarily for complete business cycles. But the Equity Committee
contended that Chemtura, a specialty (as contrasted to commodity) chemicals company, is not
that cyclical, and that Lazard thus erred by failing to compute Terminal Value based on the final
year’s cash flows 89 and/or by failing to capture an entire business cycle. In the hearing, the
extent of Chemtura’s cyclicality was a matter of sharp debate.
I find that Chemtura, as a specialty chemicals company that in several significant respects
can differentiate its products from others, is not as cyclical as other chemical companies,
particularly those that are wholly or largely commodity chemical companies. But I find that its
87 	Aronson Decl. ¶ 30 (quoting A SWATH D AMODARAN , U PS AND D OWNS : V ALUING CYCLICAL AND
COMMODITY C OMPANIES (2009)). See also Singh Decl. ¶ 22.
88 	EBITDAR went from an all-time high of $419 million in 2007, the year before the financial crisis, down to
$263 million in 2009, and under the Long Range Plan was projected to thereafter increase up to
$528 million in 2014. See Aronson Decl. ¶ 24.
89 	As noted in n. 88, the shape of the hockey stick was such that projected EBITDAR reached its peak in the
final year, 2014. Using an average from the middle would result in use of a lower EBITDAR in computing
the Terminal Value, and result in a lower TEV. Conversely, use of the EBITDAR at the time of the 2014
high point would result a higher Terminal Value, and result in a higher TEV.
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business still is cyclical in material respects, in no small part because many of its customers are.
Thus I think that normalizing for cyclicality was not inappropriate.
But with that said, I believe that to engage in normalization best, one would need to
capture an entire business cycle, and I don’t believe that Lazard necessarily did so. Also, the
Equity Committee established by cross-examination that in Lazard’s valuations of several other
chapter 11 debtors (at least some of which would seemingly be as cyclical as Chemtura), Lazard
nevertheless used the final year’s cash flows in its computation of Terminal Value, and did not
use the normalization technique it used here.90 One may legitimately wonder, then, why the
normalization technique was appropriate here but was not appropriate there—or vice versa.
While Lazard was not necessarily wrong to take cyclicality into account, its failure to do
so over a complete business cycle, and its doing so here but not in other cases, undercut the
persuasiveness of its cyclicality normalization techniques.
Looking back, then, at the Lazard and UBS DCF analyses, I find flaws in each. But in
my mind, the flaws in the UBS analysis are more pronounced. In this economic environment,
relying on the very high terminal value in the last year of an admittedly aggressive string of
growth projections is in my mind too aggressive. In a more stable economic environment, I’d
likely consider use of the last year’s cash flows for determining terminal value to be perfectly
ordinary, if not also preferred. But I don’t think that the present economic uncertainties permit
an analysis that is so subject to assumptions that are so optimistic. Also, though I find flaws in
Lazard’s efforts to capture cyclicality, I’m troubled that UBS made no effort to address
cyclicality at all.
90 	See 9/16/10 Hrg. Tr. 231-34.
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As I indicated, I have problems with Lazard’s implementation of its efforts to address
cyclicality. But on balance, I believe its DCF analysis is somewhat superior because it is less
subject to the economic uncertainty that I find to be of material concern.
iii. Comparable Companies Analysis
As noted above,91 Lazard engaged in an extensive Comparable Companies analysis,
examining the values suggested by comparable companies by six means. (Of the value ranges
derived from that Comparable Companies analysis, one92 was wholly below Lazard’s overall
TEV range (and presumably disregarded by Lazard, in a decision that the Equity Committee
would presumably welcome), and two others93 would support valuations only at the lower end of
Lazard’s range). But for the most part UBS did not engage in Comparable Companies to provide
an independent indicator of value, instead using it merely as a means of confirming the
reasonableness of its DCF analysis.
That’s disappointing, as I consider Comparable Companies analysis to be somewhat more
meaningful here than either DCF or Comparable Transactions analysis, because it’s less
susceptible to uncertainties in projections (in the case of DCF) or extraneous factors such as
control premiums, synergies, or bidding wars (in the case of Precedent Transactions). Though
Lazard didn’t assign numeric weights to the results derived from its various methodologies (and I
don’t do so either), and neither Lazard nor I would characterize our valuation conclusions as the
result of a mathematical computation, I note that for these reasons, I give Comparable
Companies analysis relatively greater weight.
91 	See page 16 supra.
92 	2010E EBITDAR–Cap Ex. See Lazard Report at 5.
93 	2010E EBITDAR and 2010E EBITDARP. See Lazard Report at 5.
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UBS did consider Comparable Companies analysis in the manner I described above, 94
and critiqued the Lazard Comparable Companies analysis for leaving off DuPont and PPG, for
including Solutia, and for including European companies. In each of those respects, I believe
Lazard was right.
DuPont and PPG dwarf the Debtors in sales, EBITDA, enterprise value, and market cap.
For instance, DuPont’s revenues are nearly 18 times that of Chemtura’s. As materially larger
companies, they aren’t as risky and trade at higher multiples. They trade at multiples well above
the average of UBS’s guideline companies. Their inclusion in the analysis inappropriately
results in a higher value.
I also believe that Lazard was right to take Solutia into account in its analysis, and that
UBS, to examine the full universe of comparables, should have done likewise. Solutia is a
specialty chemical company of a similar size to Chemtura, and has similar product lines that are
used in the same end markets as the products Chemtura sells.95 I think that UBS’s failure to
consider Solutia undercuts the Equity Committee’s Comparable Companies criticism of Lazard.
I also think that Lazard was right to include European companies as part of its
Comparable Companies analysis, and that UBS was wrong to leave them out—especially since
UBS considered them at other times and for other purposes. I accept Lazard’s testimony that the
European companies that Lazard included in its comparables analysis operate in many of the
same markets as Chemtura, make similar products, and are subject to similar tax and regulatory
environments.96 And half of Chemtura’s revenue comes from outside the U.S., 97 where
94 	See page 16 supra.
95 	See Aronson Decl. ¶ 72.
96 	See Aronson Decl. ¶ 70.
97 	See Cerimele Decl. ¶ 25.
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Chemtura would have to compete with those foreign companies. It also is puzzling that UBS
included several European companies in its Precedent Transactions Analysis,98 and in its Sum-
of-the-Parts Comparable Companies analysis,99 but left them out here—a fact that further
undercuts UBS criticisms in this regard.
Thus I find Lazard’s reasoning to be sound in its Comparable Companies analysis, which
I find, in turn, to be one of the most important indicia of value here. Especially since UBS didn’t
put forward an alternate valuation on this basis, I give Lazard’s conclusions here substantial
weight.
iv. Precedent Transactions Analysis
Here too, I note that Lazard derived a valuation range based on Precedent Transactions
Analysis and that UBS didn’t do so. Instead, UBS used this methodology merely as a means of
verifying its DCF conclusions. I think that Precedent Transactions analysis has to be used with
some care to normalize for extraneous factors that may be present in individual cases and
increase the prices in those transactions—like control premiums, a willingness to pay more to
obtain operational synergies, and hostile transactions. And I’m a little concerned about the post-
Lehman bankruptcy sample size. But I think that Precedent Transactions methodology still is
helpful, and that it tends to support a valuation lower than the valuation for which the Equity
Committee argues. Additionally, I believe that UBS’s criticism of Lazard’s Precedent
Transactions was materially flawed itself.
98 	See UBS Expert Report at 9. The Debtors note that UBS included European companies in its Precedent
Transactions analysis when that would lead to higher multiples. See Debtors Reply Br. ¶ 81.
99 	See UBS Expert Report at 7. Though the Equity Committee, through its expert, argues that Sum-of-the-
Parts analysis should be regarded differently, see 9/20/10 Hrg. Tr. 293-94, I’m not persuaded that this
should be the case.
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As noted above, a significant difference between the Lazard and UBS approaches was the
heavy reliance by UBS on transactions that predated the recent financial collapse, as measured
by the date of filing of the Lehman bankruptcy case. Lazard noted that the global economy fell
into a tailspin after the Lehman bankruptcy, and that the financial system froze and global stock
markets collapsed, causing the worst recession since the Great Depression. Credit necessary to
finance acquisitions is far less available today. I accept Lazard’s testimony that advanced
economies are fundamentally different today, and that relying on multiples from a time period
before the crash is inappropriate.
Two transactions followed the crash, one which in my view was of dubious
comparability, and the other of which plainly should have been considered. UBS considered the
former, giving it normal weight, and did not consider the latter. I have problems with each
decision.
UBS included in its Precedent Transactions analysis Sumitomo’s acquisition of a 20%
interest in Nufarm, an Australian manufacturer of crop chemicals; Lazard did not. Lazard
explained that Nufarm is comparable to Chemtura’s AgroSolutions business, but is not
comparable to the whole company. 100 Lazard provided an additional reason not to rely on the
Nufarm multiple: Sumitomo acquired the stake in Nufarm by making a “white knight” proposal
at a higher value than Sinochem, a Chinese Chemical Company that was pursuing Nufarm at the
time, and, with the benefit of hindsight, arguably overpaid for it.101 I can’t make a factual
finding that Sumitomo in fact overpaid for Nufarm, but I also can’t ignore the fact that
Sumitomo bought its stake in a competitive environment, which would be relevant even if I
agreed with UBS that Nufarm is an appropriate comparable for Chemtura as a whole. In my
100 	See Aronson Decl. ¶ 80.
101 	See Aronson Decl. ¶ 80.
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view, Sumitomo’s white knight role does not necessarily mean that the transaction should have
been left out altogether, but it does suggest that any valuation derived from the deal would be on
the high side.
I also share Lazard’s view that UBS was wrong to exclude the BASF acquisition of
Cognis from its analysis. Lazard testified that BASF’s acquisition of Cognis, which is also a
specialty chemicals manufacturer, provided the best precedent benchmark of value for
Chemtura,102 and I find that the BASF-Cognis transaction was indeed the most appropriate
comparable transaction, both by nature of company being acquired and in time.
UBS was unpersuasive in its testimony that the Cognis deal was properly excluded
because it had not yet closed. UBS admitted at trial that it was unaware of any facts that would
suggest that the deal would not close, and that had the deal already closed, UBS would have
included it in its precedent transactions analysis.103 The Equity Committee stipulated to the fact
that definitive documentation had been entered into that (unless conditions providing for rights
of withdrawal were satisfied) obligated the parties to close, and that neither buyer nor seller
could walk from the deal. 104 The price of the deal already was fixed, by documentation binding
on the parties. If the whole idea of a valuation is to determine what a willing buyer will pay and
a willing seller will accept, and that already has been determined, it is not at all persuasive to
contend that a deal with executed definitive documentation must be ignored simply because it
has not yet closed. Indeed, if there is temporal proximity, as there is here, such a deal, even if
not yet closed, may be the best comparable of all.
102 	See Aronson Decl. ¶ 56.
103 	See 9/20/10 Hrg. Tr. 209; 9/21/10 Hrg. Tr. 86.
104 	See 9/22/10 Hrg. Tr. 132.
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To be sure, the Cognis transaction, like the Sumitomo-Nufarm transaction, also had
unique characteristics. It was a control transaction, with synergies that would come out of it,
once again suggesting that any valuation derived from it could be on the high side. But to its
credit, Lazard used it anyway, and used its 6.2 multiple as a mid-range transaction, rather than as
a high one. As with the Sumitomo-Nufarm transaction, I take the high-side character of the
Cognis transaction into account.
Of course, the small number of transactions in the post-Lehman environment makes for a
small sample size. That’s a cause for some concern, and a reason for not giving this
methodology as much weight as I otherwise would. But with two comparables coming in at 6.2x
EBITDA in the post-Lehman bankruptcy era, I feel relatively comfortable in still giving some
weight to this methodology. The upper end of Lazard’s Precedent Transactions range ($2.315
billion) is somewhat higher than the upper end of Lazard’s final valuation range ($2.2 billion).105
But the transactions on which Lazard relies had synergistic and control characteristics, which
would result in a higher implied valuation, and we know that Chemtura has historically traded
lower than its peers. Lazard’s Precedent Transactions upper end is of course well below the
upper end of UBS’s valuation (based solely on DCF and the aggressive projections) of
$2.6 billion, and suggests that UBS’ valuation is too high.
v. Marketing Efforts
Another matter that informs my finding that the Debtors’ TEV doesn’t exceed $2.05
billion is the lack of buyers or investors for the Debtors at higher values or values within the
105 	See Aronson Decl. ¶ 4.
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Equity Committee’s range—a species of “market” information that informs, though it does not
solely support, my conclusion that the Debtors have met their burden as to value here.106
As I’ve discussed before,107 the Debtors cooperated with Equity Committee efforts to
market the company, which led to contacts with 19 potential investors, of whom 7 signed
confidentiality agreements. UBS made presentations to potential investors valuing the company
at $2.2 to $2.7 billion,108 a valuation which would have the same midpoint (of $2.45 billion) as
the present UBS valuation. But there were no takers, or offers, at that price or at any price that
might ultimately lead to that price.109 Nor were any members of the Equity Committee itself,
though several were hedge funds, prepared to put their own money into the Debtors at those (or
even lower) prices—a fact that I also find meaningful.110 Though I hardly expect that investors
106 	Many observers believe that behavior in the marketplace is the best indicator of enterprise value. See, e.g.,
Bank of America Nat. Trust and Sav. Ass’n v. 203 North La Salle Partnership, 526 U.S. 434, 457 (1999)
(acknowledging that “the best way to determine value is exposure to a market”). See also In re Granite
Broad. Corp., 369 B.R. 120, 140-43 (Bankr. S.D.N.Y. 2007) (Gropper, J.) (“Granite Broadcasting”)
(noting that what a willing purchaser is willing to pay “typically trumps all other[ ]” indications of value.”).
I don’t believe that always to be the case, since as I saw in the Global Crossing and Adelphia cases on my
watch, financial accounting techniques (such as capitalizing expenses without writing them down to
realizable value) or fraud can give the marketplace a distorted impression of a company’s worth. But as a
general matter, where, as here, there isn’t a suggestion that the company’s financials or projections are
inflated or misleading, I think the marketplace is often as good or better an indication of a company’s value
than expert testimony alone would be. See VFB LLC v. Campbell Soup Co., 482 F.3d 624, 633 (3d. Cir.
2007) (“Absent some reason to distrust it, the market price is a more reliable measure of the stock’s value
than the subjective estimates of one or two expert witnesses.”) (internal citations omitted).
107 	See page 10 above.
108 	This was the Paulson Presentation, Debtors’ Exhibit 70, discussed at page 10 above.
109 	Early in the marketing process, one Equity Committee member, hedge fund Strategic Value Partners,
expressed the position that Chemtura was worth 7.5x 2011 normalized EBITDAR, or $3 billion, and three
days later, UBS sent a presentation to the debtors with that same value. See Debtors Exhibits 52, 55.
While the Debtors criticize UBS for that, contending that UBS was acting under pressure by Equity
Committee members, see 9/22/10 Hrg. Tr. 45, I don’t find fault with it. At that time, UBS was acting as an
advocate for its constituency in a deal making process, a function customarily performed by investment
bankers and financial advisors.
110 	See Granite Broadcasting, 369 B.R. at 140-41 (“there is no question that in appropriate circumstances,
‘People who must back their beliefs with their purses are more likely to assess the value of the [asset]
correctly than are people who simply seek to make an argument.’”) (quoting In re Central Ice Cream Co.,
836 F.2d 1068, 1072 n.3 (7th Cir. 1987)).
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would have simply accepted offers to invest at the prices that the presentations were putting
forward, the lack of any interest in proposals at those values lends further support to my
conclusion that a $2.45 billion midpoint would be too high.111
vi. Creditors’ Preferences for Cash
I take note of another kind of “market” type information—the fact that the Plan gave
most creditors112 and all bondholders the right to elect, within limits, to take stock or cash as the
currency by which they’d get their distributions. The overwhelming majority of them elected to
take the maximum recovery in cash, rather than stock.113 A very major proportion of the
Debtors’ non-Diacetyl and environmental creditors (including all or substantially all of the
Bondholders’ Committee, which held about 68% of the bonds114 ) were hedge funds and other
distressed debt investors, sophisticated in financial analysis and having the ability to efficiently
dispose of stock if it were received as an alternative currency. Yet approximately 78% of the
electing bondholders indicated a preference for cash115 —even though they’d make an immediate
Though there were indications, as the Bondholders’ Committee notes (see Bondholders’ Comm. Reply Br.
at 6-7 & Exhibits 5, 6), that hedge fund members of the Equity Committee Strategic Value Partners and
Canyon Capital Partners sought to advance their interests over “retail” equity holders—a matter that, if
true, would be a matter of concern to me, as they were supposed to be fiduciaries—I don’t now need to
make findings in that regard.
111 	Though I don’t place reliance on what prospective investors said (as I regard those statements as hearsay,
inherently self-serving, and, possibly, bottom-fishing), the bottom line is that there were no serious
responses.
112 	Recall that creditors with Diacetyl and environmental claims were in separate classes, and they’d simply
get cash. See page 8 above.
113 	See Klamser Voting Results Decl., ECF # 3955, at Exhibit D; Kjontvedt Voting Results Decl., ECF # 3956,
at Exhibit C.
114 	See Bondholders R.2019 Statement, ECF # 2879, at ¶ 1.
115 	See Kjontvedt Voting Results Decl., ECF # 3956, at Exhibit C.
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return of 20 or 25% by taking stock if it were worth as much as the Equity Committee
contends.116
I agree with the point made by several Plan supporters that if those creditors thought the
New Common Stock was undervalued at the price at which it was offered—the natural
consequence of the Equity Committee’s position—they would have snapped it up. And if they
thought Chemtura was worth what UBS says it’s worth, they would really have snapped it up.
Their failure to do so, and their preference for cash under the Plan, suggests to me that they don’t
think that the stock is worth more than the cash, and, more fundamentally, the higher amount that
the Equity Committee contends.
vii. Credibility
While, over the years, very few of the cases before me have involved witness credibility
to any material degree, this case was an exception. The opinions of all four experts were subject
to at least some question by reason of their prior activities, the circumstances under which they
testified, inconsistencies between their trial and deposition testimony, or some combination of
those factors. With respect to the Equity Committee’s two experts, these issues—causing reason
to question their judgment, their credibility, or both—were particularly pronounced.
116 	See 9/21/10 Hrg. Tr. 58-59:
Q: …[Were you] asked this question, sir, and did you give this
answer? And do you agree as a general matter if creditors receive
equity based on a distribution that valued the company at 2.05 billion,
but in fact the company was worth 2.45 billion, that would certainly be
a good investment for those creditors? Answer, yes. Were you asked
that question, did you give that answer?
A: I was asked that question. I did give that answer.
Q: And that’s because those creditors would stand to make an
immediate return of like 20 or 25 percent on their investment, right?
…
A: The way the arithmetic you just said, they would have that sort of
return on their investment.
(apparent transcription error corrected).
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UBS’s first witness (a UBS Chemicals Industry expert)117 repeatedly seemed unwilling to
give straight answers to questions on cross-examination, even questions that were quite
preliminary and not at all argumentative. Much more troublesome, however, were the many
times he was impeached by inconsistent statements in his deposition testimony.118
UBS’s second witness (the more senior of the Equity Committee’s two experts, who
pitched the engagement and who signed the Equity Committee-UBS retention letter) was
likewise impeached on many occasions by inconsistent deposition testimony. 119 In addition, he
showed unusually strong indications of bias. In making the pitch to the Equity Committee secure
the engagement for UBS in the first place, he told the Equity Committee that he would “try to be
aggressive in valuation,”120 and in depositions acknowledged acting “with the outlook of what
would achieve the maximum value for the equity.”121
Also undermining the credibility of the two experts for the Equity Committee—and
similarly, albeit to a lesser degree, the experts for the Debtors and the Creditors’ Committee—
were the terms of their engagement agreements. The UBS retention agreement provided that in
addition to getting the customary monthly fee, UBS would get a “transaction fee” of 1.25% of
amounts distributed to Equity between $225 million and $450 million, and 2.0% of amounts over
$450 million.122 (At the Lazard $2.05 billion valuation, UBS would not get a transaction fee.)
117 	While the Debtors attacked his lack of scholarly work and the fact that he had not testified before, I was
comfortable that he had the requisite knowledge of the chemicals industry. My concerns go much more to
his unwillingness in his testimony to agree to things as to which agreement plainly was appropriate, and the
ways in which his testimony changed between the time of his deposition and the time of trial, only a week
or so later.
118 	See 9/20/10 Hrg. Tr. 105, 108, 132, 140, 221, 251.
119 	See 9/21/10 Hrg. Tr. 29, 44, 59, 87, 89, 143.
120 	See 9/21/10 Hrg. Tr. 29.
121 	See 9/21/10 Hrg. Tr. 29.
122 	See 9/21/10 Hrg. Tr. 30.
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The distribution to Equity would of course turn on the ultimate TEV, upon which the UBS
experts would later testify.
The Lazard retention agreement provided for an additional $7 million fee payable upon
consummation of a reorganization plan,123 and the Houlihan agreement provided for a “deferred
fee” of $3 million on the confirmation of a plan that was supported by the Creditors’
Committee. 124 It was foreseeable that Lazard would have to offer trial testimony—which, of
course, is exactly what happened here. Likewise, although Houlihan could (and ultimately did)
rely in substantial part on Lazard, it too would financially gain if a plan were confirmed based on
its testimony generally supporting Lazard.
In my experience, provisions like those in the Lazard and Houlihan agreements are
common, and provisions like those in the UBS agreement are, if not also common, at least not
uncommon. I approved each of them when authorizing the retentions of the three firms, and in
my view there is nothing inherently wrong with them. They’re unobjectionable as a means of
incentivizing investment bankers to find buyers or investors, or to make deals, if they’re regarded
by stakeholders as necessary or desirable to achieve those ends. But such provisions can’t be
ignored when investment bankers testify. Especially in the case of the UBS agreement—and, to
a lesser degree, also in the case of Lazard’s and Houlihan’s—they materially and adversely
affect witness credibility.
The usual stated rationale for including such provisions in retention agreements for
investment bankers is to incentivize them. But UBS had no material role in soliciting buyers or
investors or capital for the enterprise; the Debtors had plan exclusivity, and the solicitation of
investors to meet the Equity Committee’s needs was principally engaged in by hedge fund
123 	See Lazard Retention Motion, ECF #24, and Final Retention Order, ECF #641.
124 	See Houlihan Retention Motion, ECF #412, and Retention Order, ECF #638.
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members of the Equity Committee, rather than by UBS. If the purpose of the transaction fee for
UBS was indeed to incentivize it (as contrasted to simply paying UBS more), the transaction fee
had a heavy effect on its credibility. Likewise, if the purposes of the different contingent
compensation provisions for Lazard and Houlihan were in fact to incentivize them, as contrasted
to simply paying them more, their contingent fees—dependent on confirmation, which would
turn on Lazard’s testimony supporting the underlying TEV and Houlihan’s testimony generally
supporting Lazard—bore adversely on the credibility of their expert testimony as well.
The rather obvious adverse effect of incentive compensation on witness credibility has
been recognized in the caselaw, in this district and elsewhere, including in several chapter 11
valuation decisions.125 While it’s been suggested in the commentary that an expert’s contingent
fee should generally result in the expert’s disqualification as a witness,126 I think it’s sufficient—
since we bankruptcy judges conduct non-jury trials and are used to provisions of this character—
that we merely take contingent fees or incentive compensation into account as adversely
affecting credibility, and ultimately take such opinions with a grain of salt.
Finally, failures by UBS and Lazard to change the midpoints of their valuations after the
passage of time, and in the face of seemingly different circumstances, tend to undercut the
persuasiveness of each. In June 2010, UBS valued Chemtura within the range of $2.2 billion to
125 	See Granite Broadcasting, 369 B.R. at 142 (an expert’s testimony “was seriously undermined by the fact
that his compensation from the Preferred Holders is contingent on the total consideration to be received by
the Preferred Holders under a confirmed plan”); In re Oneida Ltd., 351 B.R. 79, 92 (Bankr. S.D.N.Y. 2006)
(Gropper, J.) (“Oneida Ltd.”) (a valuation expert’s retention with a contingency fee “seriously
undermine[d]” the expert’s credibility); In re Tousa, Inc., 422 B.R. 783, 839-40 (Bankr. S.D. Fla. 2009)
(taking into account fact that expert was to receive a $2 million contingency fee and where expert, after
only 5 days, announced that it would have a favorable opinion ).
126 	See Bernstein, Seabury & Williams, The Empowerment Of Bankruptcy Courts In Addressing Financial
Expert Testimony, 80 A M. BANKR . L.J. 377, 432 (Summer 2006) (“[T]he existence of a contingency in the
retention of an expert should generally result in the disqualification of the expert. An expert who has a
‘financial dog in the fight’ cannot be objective; his opinion will be swayed by his financial stake and, thus,
be inherently unreliable.”).
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$2.7 billion, with a midpoint of $2.45 billion.127 On August 29, UBS issued the valuation
opinion it offered at trial—within the narrower range of $2.3 billion to $2.6 billion, but with the
exact same midpoint.
On June 4, Lazard valued Chemtura within the range of $1.9 billion to $2.2 billion, with a
midpoint of $2.05 billion. On August 29, Lazard issued the updated report that it offered at trial.
But Lazard’s range and midpoint (the latter being the valuation upon which the Settlement was
based) were exactly the same, despite a variety of events that would at least seemingly have
affected the Debtors’ ultimate TEV, American trading markets, or both—such as the Debtors’
beating EBITDA projections for Q2 by $30 million and failing to make the projections in
August, reduced uncertainty in the European trading markets, and progress in controlling the oil
spill in the Gulf.
That these similarities were mere coincidence is of course possible, but I find such
coincidence improbable in each case. They tend to cause me to be more proactive in making my
own valuation judgment, rather than to accept either of the proffered ones.
D. Conclusions re: Valuation
The facts found above underlie my ultimate factual finding, set forth above and again
now, that the Debtors’ TEV is no higher than the $2.05 billion TEV underlying the Settlement.
The evidence to the contrary is unpersuasive. In fact, the Creditors’ Committee makes some
persuasive points—that the projections in the LRP are aggressive; that in the face of an economy
that, while getting better, is getting better slowly, projections will be difficult to achieve; that the
Debtors may not retain the above-forecast EBITDA generated in the first half of 2010; and that
Lazard failed to impose a valuation discount for the Debtors’ historic rank below the majority of
127 	See Paulson Presentation, Debtors’ Exhibit 70.
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their peers. But I don’t need to rule on the Creditors’ Committee’s points in that regard. By
each of the traditional valuation techniques and by the evidence of behavior in the
“marketplace,” the Debtors have shown, by a preponderance of the evidence, that the actual TEV
of Chemtura is no higher than the level upon which the Settlement is based.
8. Reasonableness of the Settlement
Whether the Settlement is reasonable, which is a finding I must make to confirm the Plan,
is a mixed question of fact and law, and is thus principally discussed below. But it has factual
underpinnings, the most important of which is my conclusion, discussed above and repeated
here, that under the Settlement, creditors are not being paid more than in full. I also find that the
Settlement was negotiated at arm’s length and by competent professionals.
9. Good Faith
If I am going to confirm the Plan, I also need to find that it was proposed in good faith. 128
Though this is a mixed question of fact and law, and thus is principally discussed below, I easily
can make the underlying purely factual findings here.
There is here no evidence to the contrary. As it became increasingly clear that the
Debtors would turn out to be solvent, principally by reason of their ability to settle and reduce
claims, the Debtors acted appropriately to address the needs and concerns of all stakeholders,
including not just creditors but also Equity. I’ve previously found that the Debtors appropriately
cooperated in the marketing process. I find that they were receptive to offers for the company at
a higher valuation, and I don’t believe, or find, that the failure to secure offers at higher
valuations can in any way be attributed to any lack of good faith on their part.
128 	See Bankruptcy Code § 1129(a)(3).
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Similarly, the Debtors’ dealings with their stakeholders were above board and no
different from dealings that are typical in large chapter 11 cases. Their arrangements to propose
a largely, but not entirely, consensual plan were typical of that which is to be expected in any
large chapter 11 case.
A major point of controversy after the Equity Committee was formed was the extent to
which the Debtors, after a reorganization, should be highly leveraged, as the Equity Committee
hoped. I can hardly find fault on the part of the Debtors’ management in concluding that this
was a bad idea. And I cannot and do not find that management’s desire for a less leveraged
company is indicative of bad faith. If there’s anything that we’ve learned from the events of the
last two years and the failed LBOs then and in prior years, it’s that high levels of leverage can be
dangerous. The Debtors’ management’s desire to deleverage the company and avoid subjecting
it to future risks from high levels of debt was fully understandable. If that is not also to be
commended, at the very least it cannot be faulted.
For these reasons and others in the Discussion, I find that the Plan was proposed in good
faith.
10. Ultimate Findings of Fact129
For reasons set forth above and in the Discussion below, I find:
1. The Settlement is in the best interests of the Estate.
2. Under the Plan, creditors are not being paid more than in full.
3. The Settlement is “fair and equitable” in the sense that it is fair to the Estate and to its
stakeholders.
129 	Some of these are mixed questions of fact and law, and other facts appear in the Discussion below. To the
extent it matters, facts, mixed questions of fact and law, and legal conclusions should be regarded as
whatever they actually are.
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4. The Settlement is “fair and equitable” in the sense that it complies with the Absolute
Priority Rule and in the sense that creditors not be paid more than in full.
5. The Plan was proposed in good faith.
Discussion
This controversy, almost without exception, is about the facts and not the law. 130 It’s for
that reason that the preceding factual discussion was so lengthy. My legal analysis breaks no
new ground. But the mixed questions of fact and law, and the residual legal issues, are discussed
below.
1. “Fair and Equitable” under Section 1129(b)(1)
Of course, the Plan can be confirmed only if the requirements of section 1129 of the
Code are satisfied, the most important of which, for our purposes, is the “fair and equitable”
requirement of section 1129(b)(1) of the Code,131 which protects the Equity as a dissenting class.
It’s undisputed that the “fair and equitable” requirement encompasses a rule that a senior class
cannot receive more than full compensation for its claims.132 Courts will deny confirmation if a
130 	The only material exception involves the need to assess the fairness of the Settlement, which requires, in
part, analysis of conflicting caselaw on prepayment prohibitions and make-whole premiums. See Section 2
below.
131 	That section provides, in relevant part:
[I]f all of the applicable requirements of subsection (a) of this section
other than paragraph (8) [which requires acceptance by every class] are
met with respect to a plan, the court, on request of the proponent of the
plan, shall confirm the plan notwithstanding the requirements of such
paragraph if the plan does 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.
(emphasis added). As the Equity is impaired under the Plan and hasn’t accepted it, it’s undisputed that the
Equity is entitled to the protections of section 1129(b)(1).
132 	In re Exide Technologies, 303 B.R. 48, 61 (Bankr. D. Del. 2003) (Carey, J.) (“Exide Techs.”). See also In
re Future Energy Corp., 83 B.R. 470, 495 n.39 (Bankr. S.D. Ohio 1988) (“Future Energy”); 7 COLLIER ON
BANKRUPTCY ¶ 1129.03[4][a][ii] (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev. 2007) (“The
second major component of the ‘fair and equitable’ requirement is that no creditor or interest holder be paid
a ‘premium’ over the allowed amount of its claim. Once the participant receives or retains property equal
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plan undervalues a debtor and therefore would have resulted in paying senior creditors more than
full compensation for their allowed claims.133
It was for this reason that the confirmation hearing devoted so much time to the Debtors’
value, as measured by TEV. It was necessary to address the Equity Committee’s legitimate
concerns, if established, that “[t]he Debtors' Plan, if confirmed with the proposed TEV, [would]
overpay[] unsecured creditors and bondholders” and that the Plan proposed “to equitize their
allowed claims at an artificially low TEV.”
After hearing the evidence, however, and making the factual findings I did after that 4-
day evidentiary hearing, I’m satisfied that the Equity Committee’s “fair and equitable”
objections here lack merit. I’m satisfied that the Debtors’ TEV doesn’t exceed the $2.05 billion
TEV upon which the Settlement is based and upon which the New Common Stock will be
issued. Creditors—who of course are entitled to be paid in full, but not more than in full—will
here not be overpaid.
By reason of my factual findings above, I now find, as mixed questions of fact and law,
that creditors will not be paid more than in full and that the Plan is “fair and equitable” within the
meaning of section 1129(b)(1).134 And I rule, as matter of law, that the legal requirements of
section 1129(b)(1) have been satisfied.
to its claim, it may receive no more.”); Kenneth N. Klee, All You Ever Wanted to Know About Cram Down
Under the New Bankruptcy Code, 53 A M. BANKR . L.J. 133, 148, 149, 166 (1979).
133 	See Exide Techs., 303 B.R. at 61, 66 (finding that plan undervalued debtors and denying confirmation); In
re MCorp Fin., Inc., 137 B.R. 219, 235 (Bankr. S.D. Tex. 1992) (Clark, J.) (denying confirmation under
section 1129(b) where plan failed to establish upper limit to creditor distributions at the expense of
rejecting stockholders); Future Energy, 83 B.R. at 495 n.39 (“Clearly, overpayment of senior creditors is
violative of the fair and equitable standard.”); In re Walat Farms, Inc., 70 B.R. 330, 335 (Bankr. E.D.
Mich. 1987) (noting that it “would do violence to the ‘fair and equitable’ standard by paying [the creditor]
more than its claim”).
134 	“Fair and equitable” is also a requirement for the approval of settlements, where it is subject to a double
entendre requiring two separate things. I discuss it in that separate context in Section 2 below.
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2. The Settlement
A. Standards for Approval of Settlement
The Settlement embedded in the Debtors’ Plan135 requires approval under Rule 9019 of
the Federal Rules of Bankruptcy Procedure. Bankruptcy Rule 9019 provides “after notice and a
hearing, the court may approve a compromise or settlement.”136 The legal standard for
determining the propriety of a bankruptcy settlement is whether the settlement is in the “best
interests of the estate.”137 This standard is well established in this district, where my analysis of
the settlement factors in the Adelphia DoJ/SEC Settlement Decision was approved by the district
court.138 The Supreme Court held in Protective Comm. for Indep. Stockholders of TMT Trailer
Ferry, Inc. v. Anderson139 that to determine that a settlement is in the best interests of the estate,
the settlement must be “fair and equitable.”140 Such a finding is to be based on “the probabilities
of ultimate success should the claim be litigated,” and:
[A]n educated estimate of the complexity, expense, and likely duration of such
litigation, the possible difficulties of collecting on any judgment which might be
obtained, and all other factors relevant to a full and fair assessment of the wisdom
of the proposed compromise. Basic to this process in every instance, of course, is
the need to compare the terms of the compromise with the likely rewards of
litigation.141
135 	See Plan at Art. 5.1.
136 	Fed. R. Bankr. P. 9019.
137 	In re Purofied Down Prods. Corp., 150 B.R. 519, 523 (S.D.N.Y. 1993) (Leisure, J.) (“Purofied Down
Products”).
138 	In re Adelphia Communications Corp., 327 B.R. 143 (Bankr. S.D.N.Y. 2005), adhered to on
reconsideration, 327 B.R. 175 (Bankr. S.D.N.Y. 2005), aff’d, 337 B.R. 475 (S.D.N.Y. 2006) (Kaplan, J.),
aff’d by summary order, 224 Fed. Appx. 14, 2006 WL 3826695 (2d Cir. 2006), cert. denied, 552 U.S. 941
(2007) (“Adelphia DoJ/SEC Settlement Decision”).
139 	390 U.S. 414 (1968) (“TMT”).
140 	Id. at 424.
141 	Id. at 424-25. See also Purofied Down Products, 150 B.R. at 523; Official Comm. of Unsecured Creditors
of Int’l Distrib. Ctrs., Inc. v. James Talcott, Inc. (In re Int’l Distrib. Ctrs., Inc.), 103 B.R. 420, 422
(S.D.N.Y. 1989) (Conboy, J.) (“International Distribution Centers”) (determination as to whether
proposed compromise is fair and equitable requires exercise of informed, independent judgment by court).
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A bankruptcy court need not conduct an independent investigation into the
reasonableness of the settlement but must only “canvass the issues and see whether the
settlement falls below the lowest point in the range of reasonableness.”142
It is not necessary for the court to conduct a “mini-trial” of the facts or the merits
underlying the dispute.143 Rather, the court only need be apprised of those facts that are
necessary to enable it to evaluate the settlement and to make a considered and independent
judgment about the settlement.144 In doing so, the court is permitted to rely upon “opinions of
the trustee, the parties, and their attorneys.”145
Citing TMT and cases from this Circuit, the Second Circuit, in Iridium, its well-known
decision,146 provided a list of factors (the “Iridium factors”) to consider in approving a
settlement:
(1) The balance between the likelihood of plaintiff’s or defendants’
success should the case go to trial vis-à-vis the concrete present and future
benefits held forth by the settlement without the expense and delay of a trial and
subsequent appellate procedures;
(2) The prospect of complex and protracted litigation if the settlement is
not approved;
(3) The proportion of the class members who do not object or who
affirmatively support the proposed settlement;
142 	In re W.T. Grant Co., 699 F.2d 599, 608 (2d Cir. 1983) (“W.T. Grant”) (internal quotation marks omitted).
143 	Purofied Down Products, 150 B.R. at 522; International Distribution Centers, 103 B.R. at 423.
144 	See Purofied Down Products, 150 B.R. at 522; In re Energy Coop., Inc., 886 F.2d 921, 924-25 (7th Cir.
1989).
145 	International Distribution Centers, 103 B.R. at 423.
146 	In re Iridium Operating LLC, 478 F. 3d 452 (2d Cir. 2007) (“Iridium”).
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(4) The competency and experience of counsel who support the
settlement;
(5) The relative benefits to be received by individuals or groups within the
class;
(6) The nature and breadth of releases to be obtained by the directors and
officers as a result of the settlement; and
(7) The extent to which the settlement is truly the product of arms-length
bargaining, and not of fraud or collusion.147
In addition, where a settlement is presented for approval as part of a plan of
reorganization, it may only be approved where it is also “‘fair and equitable’ in the sense of
conforming to the absolute priority rule.”148
As a general matter, settlements or compromises are favored in bankruptcy and, in fact,
encouraged.149 As the Supreme Court noted in TMT:
147 	Id. at 462. See also Adelphia DoJ/SEC Settlement Decision, 327 B.R. at 159-60 (citing In re Texaco, 84
B.R. 893, 901 (Bankr. S.D.N.Y. 1988)).
148 	Iridium, 478 F.3d at 463. The Second Circuit explained the difference between the two “fair and equitable”
inquiries for the purpose of approving a settlement as part of a chapter 11 plan. The court noted, “[t]he “fair
and equitable” analysis using the Rule 9019 factors, however, does not assess whether a plan conforms to
the absolute priority rule.” Id. at 463 n.18. The court went on to clarify that:
In the Chapter 11 context, whether a settlement’s distribution plan
complies with the Bankruptcy Code’s priority scheme will often be the
dispositive factor. However, where the remaining factors weigh heavily
in favor of approving a settlement, the bankruptcy court, in its
discretion, could endorse a settlement that does not comply in some
minor respects with the priority rule if the parties to the settlement
justify, and the reviewing court clearly articulates the reasons for
approving, a settlement that deviates from the priority rule.
Id. at 464.
149 	See In re New York, N. H. & H. R.R. v. Smith, 632 F.2d 955, 959 (2d Cir. 1980) (courts generally favor
compromises, as compromises are “a normal part of the process or reorganization” (citing Case v. Los
Angeles Lumber Products Co., 308 U.S. 106 (1939))); Purified Down Products 150 B.R. at 522-523
(settlement approved, noting that approval should not be overturned absent a clear abuse of discretion,
which is evidenced by lenient standards which encourage settlement); In re World Health Alternatives, Inc.,
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Compromises are a normal part of the process of reorganization. In administering
reorganization proceedings in an economical and practical manner it will often be
wise to arrange the settlement of claims as to which there are substantial and
reasonable doubts.150
The decision whether to accept or reject a compromise lies within the sound discretion of
the court.151
B. Settlement Analysis
I then turn to the specifics of the Settlement, to determine whether, on the whole, it meets
the applicable standards.
i. Issuance of New Common Stock
The Equity Committee’s different view of the Debtors’ TEV, discussed above, underlies
its most vigorous criticism of the Settlement’s reasonableness. I doubt that if, as a premise of the
Settlement, the Debtors’ TEV were materially understated (and if, as a result, an excessive
amount of New Common Stock were issued to satisfy creditor claims), any such settlement could
be regarded as reasonable—at least unless outweighed by other aspects of the settlement that
would trump the negative aspects of this scenario. The Settlement wouldn’t be “fair and
equitable” in the first sense in which courts use that expression, or in other words, it wouldn’t be
in the best interests of the estate; the estate would have given away the store.
And I assume, without needing to decide the issue, that if, as a premise of the Settlement,
the Debtors’ TEV were understated at all (and, if, as a result, creditors were paid more than in
full), any such settlement would fail under Iridium’s implementation of the second type of “fair
344 B.R. 291, 296 (Bankr. D. Del 2006) (settlement approved, noting that settlements are favored,
minimize litigation, and expedite administration of the estate).
150 	TMT, 390 U.S. at 424.
151 	See Purofied Down Products, 150 B.R. at 522 (“A Bankruptcy Court’s decision to approve a settlement
should not be overturned unless its decision is manifestly erroneous and a ‘clear abuse of discretion.’”).
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and equitable” requirement as applied to settlements152 —that creditors simply can’t be paid more
than in full.
But neither of those concerns is applicable here, and I can’t find the Settlement
unacceptable by reason of its TEV underpinnings. As discussed at extensive length above, I find
that the Debtors’ TEV does not exceed the $2.05 billion enterprise value upon which the
Settlement was based. Accordingly, there’s nothing wrong with the Settlement’s having
provided for an issuance of stock on the assumption that the Debtors’ TEV wouldn’t exceed that
amount. Basing the Settlement on that premise was entirely reasonable (and not just within the
bounds of reasonableness), and was hardly giving away the store. And because creditors
wouldn’t be paid more than in full, it would be “fair and equitable” for Iridium second-
requirement purposes as well.
ii. Make-Whole and No-Call Provisions
The second most controversial aspect of the Settlement is its allocation of value to
bondholders on account of the “Make-Whole” and “No-Call” Provisions in the 2016 and 2026
Notes’ documentation, respectively. Make-whole and no-call provisions in bond indentures
protect lenders’ right to the yield that was expected at the time that they made their loans, though
such provisions sometimes raise concerns, particularly (or, it could be argued, only) when they
come at the expense of other creditors. When a loan is redeemed before maturity or (sometimes)
upon default, a make-whole provision requires a borrower to pay a premium to compensate the
lender for the loss of anticipated interest that might result—as, for example, the loss that a lender
might suffer if the bond were redeemed in an environment where prevailing interest rates are
152 	See Iridium, 478 F.3d at 462 (“. . . the Supreme Court has held that a settlement presented for approval as
part of a plan of reorganization, because it constitutes part of the plan, may only be approved if it, too, is
‘fair and equitable’ in the sense of conforming to the absolute priority rule.”).
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lower than those the parties bargained for at the time the bond was issued.153 Similarly, a no-call
provision prohibits the borrower from prepaying the indenture obligations at all,154 again
protecting the lender’s yield.
The Settlement provides for an allowed claim of $50 million to holders of the 2016 Notes
to resolve Debtor’s potential liability arising from the Make-Whole Provision in the 2016 Notes.
That provision provides:
At any time and from time to time prior to the Maturity Date,155 the Company
may, at its option, redeem all or any portion of the Securities at the Make-Whole
Price plus accrued and unpaid interest to the date of redemption.156
The Make-Whole Settlement Amount is equal to about 42% of the amount that would be
payable if the Make-Whole Provision were found to be enforceable.157
In addition, the Settlement provides holders of the 2026 Notes with an allowed claim in
the amount of $20 million to resolve the Debtor’s potential liability under the No-Call Provision
in those Notes. The 2026 Notes Indenture states that the notes may not be redeemed prior to
their stated maturity date.158 Unlike the 2016 Notes, the 2026 Notes don’t contain a Make-
Whole Provision or a formula for calculating the amount of damages payable if the No-Call
Provision is breached. But considering the possibility that I or a higher court would award
damages for a breach of the No-Call Provision (and that the damages would be computed using
the formula provided in the 2016 Notes), the parties provided for a No-Call Settlement Amount
153 	See In re MarketXT Holdings Corp, 376 B.R. 390, 417 (Bankr. S.D.N.Y 2007) (Gropper, J.).
154 	See In re Calpine Corp., 365 B.R. 392, 397-400 (Bankr. S.D.N.Y 2007) (Lifland, J.) (“Calpine I”), aff’d
with a disagreement as to this issue after the Settlement here was reached, HSBC Bank USA, N.A. v.
Calpine Corp, 2010 U.S. Dist. LEXIS 96792, 2010 WL 3835200 (S.D.N.Y. Sept. 15, 2010) (Daniels, J.)
(“Calpine II”).
155 	The maturity date of the 2016 Notes is June 1, 2016.
156 	See 2016 Notes at A-3 ¶ 5.
157 	If the 2016 Notes were breached, the related claim would total $119,721,901.48, as calculated on the date
the Disclosure Statement was approved. See Plan at §3.3(f)(i).
158 	See First Supplemental Indenture to the 2026 Notes Indenture at Annex II.
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fixed at approximately 39% of the amount that would be payable if damages were awarded for
the Debtors’ breach of the No-Call Provision.159
Thus we have bondholder claims for the Make-Whole Premium, in one case, and for
damages for alleged breach of the No-Call Provision, in the other. The Equity Committee
disputes the reasonableness of the settlements of those claims, at 42% and 39% of the claimed
amounts, respectively.
The parties seem to acknowledge that the most relevant Iridium factor to an assessment
of the wisdom of this aspect of the Settlement is each side’s likelihood of success in litigation as
to bondholder entitlements on those claims. I agree.
When the Settlement between the Debtors, the Creditors’ Committee, and the
Bondholders’ Committee was reached, there were two leading decisions in this district on claims
premised on make-whole and no-call provisions in bond indentures.
In Calpine I,160 each of two issues of secured notes (with one having a first priority, and
one having a second priority) contained no-call provisions and make-whole provisions in their
loan documentation. In each case, no-call provisions in the documentation prohibited repayment
altogether in all but the last two years of the borrowing. And make-whole provisions in the
documentation permitted repayment in the last two years before maturity, but only upon payment
of a make-whole premium. A third issue of secured notes (with a third priority) contained only a
no-call provision.161
159 	If the 2026 Notes were breached, the related claim would total $50,748,400.26, as calculated on the date
the Disclosure Statement was approved. See Plan at §3.3(h)(i).
160 	365 B.R. at 392.
161 	The first-priority notes matured in 2009. Their documentation prohibited repayment before April 1, 2007
and required payment of a premium in the case of repayment between April 1, 2007 and their maturity in
2009. The second-priority notes had a maturity date of 2010. Their documentation prohibited repayment
before April 1, 2008 and required payment of a premium in the case of repayment between after April 1,
2008 and maturity. The third-priority notes prohibited repayment prior to their maturity in 2011.
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None of the notes required the payment of a premium in the event of repayment pursuant
to acceleration. The debtors in Calpine I filed a chapter 11 case, at a time when the no-call
provisions in each of those three issues of notes were still in effect. The Debtors sought to
replace those three issues of secured notes with postpetition financing, at a lower rate.
Judge Lifland declined to award what would have been in substance specific performance
of the no-call provisions, and also ruled that claims for breach of the no-call provisions weren’t
secured claims. However, he ruled (over the objections of the Debtors and Creditors’
Committee) that the no-call provisions would support unsecured claims for expectation damages
resulting from the Calpine debtors’ breach of them.162 Judge Lifland calculated the damages
based upon the premiums in the make-whole provisions of the first and second priority debt
documentation, even though they hadn’t yet been triggered, as a useful measure of the resulting
loss.
In the second of the two key cases in this district at the time the Settlement was struck, In
re Solutia,163 bondholders relying on Judge Lifland’s Calpine I decision sought similar
expectation damages for loss of the future stream of interest payments. But Judge Beatty
rejected this claim. First, she found that because the bondholders had provided for an automatic
acceleration clause in the indenture, they had chosen to give up their future income stream in
favor of having an immediate right to collect. The notes had become fully mature, and because
prepayment could only occur prior to maturity, Judge Beatty ruled that by definition, there was
162 	See Calpine I, 365 B.R. at 399 (“while the agreements do not provide a premium or liquidated damages for
repayment during the period the Debtors propose, the CalGen Secured Lenders still have an unsecured
claim for damages for the Debtors’ breach of the agreements” (citing Noonan v. Fremont Financial, (In re
Lappin Electric Co.), 245 B.R. 326, 330 (Bankr. E.D. Wis. 2000) (McGarity, J.) (“this court is in
agreement with a majority of courts that view a prepayment charge as liquidated damages, not as
unmatured . . . interest that would be disallowed under section 502(b)(2)”))).
163 	379 B.R. 473 (Bankr. S.D.N.Y. 2007) (Beatty, J.) (“Solutia”).
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no prepayment.164 Second, she found that the bond indenture lacked language requiring the
payment of a premium upon automatic acceleration. And third, she determined that the
noteholders failed to establish the existence of a no-call provision in the indentures.165
Rejecting the reasoning in Calpine I, Judge Beatty stated:
This Court respectfully disagrees with Calpine because it reads into agreements
between sophisticated parties provisions that are not there. Perhaps the parties
negotiated on the subject but were unable to reach an agreement. It may simply,
although less probably, be that this subject was overlooked. In either case, the
court cannot supply what is absent . . . . Nothing in the Bankruptcy Code requires
this court to provide the 2009 Noteholders with more than the Original Indenture
provides. Put yet another way, they have no dashed expectations for which
compensation is due.166
Here, neither the 2016 nor 2026 Notes contain make-whole provisions that specifically
address the payment of a premium upon the filing of a chapter 11 case, and the resulting
automatic acceleration to maturity. As discussed at greater length below, I’d have to make the
decision on more generalized language. As of the time the Settlement was reached, if the issue
were litigated on the merits, the bondholders would prevail if I were to follow Judge Lifland in
Calpine I, or otherwise consider it appropriate to award “expectation damages” for the loss of the
future incremental interest. Conversely, the bondholders would lose if I were to follow Solutia,
or find other reasons for denying them their alleged Make-Whole Premium entitlement or
damages for interest they might earn in the future. Of course, at the time that the Settlement with
the Bondholders’ Committee was entered into, it was impossible to predict with any certainty
which of the two conflicting decisions, Calpine I or Solutia, I or any appellate courts would
follow, or the extent to which we’d look to authority outside of this district, or our own
164 	See id. at 488.
165 	See id. at 489.
166 	Id. at 485 n. 7. The reference to “dashed expectations” was apparently to provide a contrast to the situation
in Calpine I, where similar language was used. See 365 B.R. at 399.
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independent analysis, in deciding the bondholders’ entitlement to the future interest income that
they’d no longer obtain.167
Since the Settlement was entered into, however, two new decisions have come down, one
on each side of the controversy.
In the first of them, Premier Entertainment Biloxi, on September 3, Judge Olack rejected
a contention that the make-whole provision there gave rise to a secured claim.168 But he ruled
that a breach of the no-call provision would give rise to an unsecured claim. 169 In a lengthy and
very thorough analysis (too long to discuss in comparable length here), Judge Olack first looked
at the indentures’ contractual language; then looked at the New York law on the subject; and
then looked at particular bankruptcy considerations, with extensive consideration of Calpine I
and Solutia. Although he ruled that the requisite language was lacking in the documentation
before him to support a claim for the make-whole, he awarded an allowed unsecured claim for
the breach of the no-call.
In the second of the very recent decisions, Calpine II, on September 15, 170 Judge Daniels,
at the district court level, differed with the allowance of unsecured claims in Calpine I, though he
167 	I say “future interest income” as a shorthand, though I believe that at least under New York law (which is
applicable here), the appropriate measure of damages for breach of a no-call provision wouldn’t be the total
interest that the lenders would secure if there hadn’t been early payment, but instead would be only the
present value of the difference between (1) the interest income the lender would have earned on the loan
through maturity and (2) the interest income that the lender could have earned by making an investment
comparable to the loan (i.e., mitigating its damages). See Teachers Ins. & Annuity Ass’n of Am. v. Butler,
626 F.Supp. 1229, 1236 (S.D.N.Y. 1986) (Weinfeld, J.); Teachers Ins. & Annuity Ass’n of Am. v. Ormesa
Geothermal, 791 F.Supp. 401, 415-16 (S.D.N.Y. 1991) (Wood, C.J.); Teachers Ins. & Annuity Ass’n of Am.
v. Coaxial Communs. of Cent. Ohio, 799 F.Supp. 16, 19 (S.D.N.Y. 1992) (Broderick, J.) (collectively, the
“TIAA Cases,” the first two of which I tried as a lawyer). See also Premier Entertainment Biloxi LLC v.
U.S. Nat’l Ass’n (In re Premier Entertainment Biloxi LLC), 2010 Bankr. LEXIS 2994, 2010 WL 3504105
(Bankr. S.D. Miss. 2010) (Olack, J.) (“Premier Entertainment Biloxi”) (citing the TIAA Cases).
168 	See Premier Entertainment Biloxi, 2010 Bankr. LEXIS 2994 at *91-*131, 2010 WL 3504105 at *25-*37.
169 	See id., 2010 Bankr. LEXIS 2994 at *173-*175, 2010 WL 3504105 at *49.
170 	In Calpine II, Judge Daniels did not discuss Premier Entertainment Biloxi, which had been decided only 12
days earlier, and it is fair to assume that nobody brought that case to his attention, or gave him the benefit
of the Premier Entertainment Biloxi analysis.
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did not, in so many words, reverse it.171 Judge Daniels reasoned that “[b]ecause Debtor’s
bankruptcy filing rendered the no-call provision in the notes unenforceable and liability cannot
be incurred pursuant to an unenforceable contractual provision, Debtor did not incur any liability
for repaying the notes.”172 In addition, he concluded that no payment could be awarded under
the make-whole provisions because they were not yet triggered according to their terms.
Following Solutia, Judge Daniels concluded, “[T]he notes could have provided for the payment
of premiums in the event of payment pursuant to acceleration . . . [w]ithout such a provision,
however, no damages are recoverable after acceleration.”173
With the Calpine II decision having come down, the Equity Committee contends that the
bondholders are not entitled to any damages under the Make-Whole and No-Call Provisions, and
that I should therefore reject the Settlement as unreasonable. The Equity Committee cites
Newman v. Stein, in which the Second Circuit, speaking through Judge Friendly, wrote “it would
be inappropriate for a reviewing court to freeze matters as of the moment at which the parties
entered into an agreement and ignore subsequent developments which either reinforce or
undermine the original decision to settle.”174
Accordingly, the Calpine II decision must be considered, but so must Premier
Entertainment Biloxi—especially since neither is binding on me and each should be considered
to the extent, but only the extent, it’s persuasive. But of course, I’m not being asked to decide
the entitlements issues on the merits. My task here is merely to decide whether, in light of all
171 	See Calpine II, 2010 U.S. Dist. LEXIS 96792, 2010 WL 3835200.
172 	Id., 2010 U.S. Dist. LEXIS 96792 at *12; 2010 WL 3835200 at *4.
173 	Id., 2010 U.S. Dist. LEXIS 96792 at *14; 2010 WL 3835200 at *4.
174 	Newman v. Stein, 464 F. 2d 689, 696 (2d Cir. 1972).
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applicable case law and my own analysis, “the settlement falls below the lowest point in the
range of reasonableness.”175
Determining whether the Make-Whole and No-Call Provisions of the two series of notes
would support claims would require at least two layers of analysis. The first layer would involve
matters of state law—whether a payment or damages would become due, and, if so, to what
extent. This layer, in turn, would present multiple issues. I’d first have to determine, as a matter
of contractual interpretation, whether there was a breach of the No-Call or a trigger of the Make-
Whole in the first place—looking particularly at the extent to which, under the documents, there
would in fact be a prepayment before “maturity” (or whatever the documents make relevant),
which would then turn on the extent to which the maturity date (or any other relevant date) could
be deemed to have changed as a consequence of the bankruptcy filing, by acceleration or
otherwise. If state law triggered a bondholder entitlement, I’d then have to determine the
appropriate damages for a violation of the No-Call, and whether, under the Make-Whole, the
“punishment fits the crime”—and if it didn’t, whether the Make-Whole Premium should thus be
wholly disallowed as a penalty, or simply reduced to an appropriate amount.
The second layer would involve the special considerations that apply in bankruptcy cases.
(a) The State Law Layer
I turn first to the state law layer, and then to the first state law issue. Since the
documentation for the 2016 Notes makes the entitlement to the Make-Whole turn on payment
before “the Maturity Date,” 176 we have an issue as to that, based on what I think is some, but not
175 	W.T. Grant, 699 F.2d at 608.
176 	The Make-Whole Provision appeared only in the 2016 Notes, as contrasted to their indenture. It provided:
At any time and from time to time prior to the Maturity Date, the
Company may, at its option, redeem all or any portion of the Securities
at the Make-Whole Price plus accrued and unpaid interest to the date of
redemption.
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much, ambiguity in the documents. As the 2016 Notes themselves were drafted, “Maturity
Date” was defined as June 1, 2016,177 and the right to accelerate or to file a proof of claim did
not change that contractual definition. But the 2016 Notes’ related indenture, which at least
seemingly would have to be read together with the Notes themselves, was somewhat different. It
had separate definitions for “Maturity Date,”178 “Stated Maturity,” 179 and “Maturity.”180 The
bondholders would rely on plain meaning doctrine, based on the Notes’ definition of “Maturity
Date.” The bondholders’ opponents could say that “Maturity Date” as used in the notes
themselves shouldn’t be looked at in a vacuum, and that “Maturity Date” was changed by the
separate definition of “Maturity” in the indenture and then by operation of law.
But as a matter of contractual interpretation, I think such an argument would be weak,
and that the bondholders would have substantially the better argument as to this issue. The
Notes could have made the Make-Whole applicable to payment before “Maturity,” but instead
referred to payment before the “Maturity Date.” And it’s obvious that the indentures drafters
considered it appropriate to provide separate definitions for these terms. This, then, would
distinguish the present case from cases like Solutia, where the contractual drafting was
inadequate.
The second state law issue would deal with the measure of bondholder entitlement if a
Make-Whole Premium were recoverable. The 2016 Notes’ Make-Whole Provision provided for
2016 Notes ¶ 5.
177 	“Maturity Date” was a defined term, appearing in ¶ 5 as well: “‘Maturity Date’ means June 1, 2016.”
178 	See Indenture Art. I (“Maturity Date,” with respect to the Initial Securities, means June 1, 2016.”).
179 	See id. (“Stated Maturity” means, with respect to any security, the date specified in such security as the
fixed date on which the payment of principle of such security is due and payable.”).
180 	See id. (“Maturity,” when used with respect to any Security, means the date on which the principal of such
Security or an installment of principal becomes due and payable as provided therein or in this Indenture,
whether at the Stated Maturity, on a Change of Control Payment Date, or by declaration of acceleration,
notice of redemption, notice of option to elect repayment or otherwise.”) (emphasis added).
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a bondholder entitlement based on a fairly complex and inartfully drafted formula.181 I don’t
have the mathematical expertise to gauge whether this Make-Whole Provision would be the
equivalent of the measure of damages approved in the TIAA Cases (or otherwise would be a fair
approximation of the lenders’ loss by early repayment), but I’d have a number of questions in
that regard.
First, I’d ask about the mathematical basis for the formula. The 2016 Notes’ Make-
Whole formula at least seemingly doesn’t measure the difference in present worth of two
alternate cash flow streams—one based on this borrowing and one based on any alternative
investment in which the bondholders would then reinvest their repayment, even at 50 basis
points over Treasuries.
Second, I don’t have the investment banking expertise to determine whether the discount
rate is too low, but I’d also have questions in that regard. I’d ask whether, as a matter of
discount rate mathematics, choosing a low discount rate would result in a higher present worth—
and, thus, a higher Make-Whole Amount. And I’d ask whether it’s correct to select a discount
181 	In a huge single-spaced block of text, it provided, in relevant part, after I pruned it, hopefully without
deleting essential language (and after reformatting to make it somewhat easier to read):
“Make-Whole Amount” with respect to a Security means an amount
equal to the excess, if any, of
(a) the present value of the remaining interest and principal
payments due on Such Security … as if such Security were
redeemed on the Maturity Date, computed using a discount
rate equal to the Treasury Rate plus 50 basis points, over
(b) the outstanding principal amount of such Security.
“Treasury Rate” with respect to a Security means the yield to maturity
… at the time of the computation of United States Treasury securities
with a constant maturity… which has become publicly available at
lease two Business Days prior to the date of the redemption notice …
most nearly equal to the then remaining maturity of such Security
assuming that such Security will be redeemed on the Maturity Date….
It then provided, in a proviso, for a mathematical adjustment, using linear interpolation, to deal with any
differences in the average life of the Treasury securities used to determine the discount rate.
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rate of only 50 basis points over Treasuries, as I’d wonder whether substitute corporate
borrowings would have a materially higher yield.
If my concerns in these respects turned out to be well-founded (though of course I don’t
know if they would be), I might be reluctant to enforce such a provision as written, as it would at
least arguably amount to a penalty, as insufficiently related to the lenders’ actual damages. We’d
then get to the subsequent issue of whether I should entirely disregard the Make-Whole
Provision or cut it down to conform to existing New York law. And I think all of these issues
would be subjects of fair debate.
But if, as seems to be the case, the sophisticated parties who agreed to these provisions
were trying to approximate the lenders’ loss in the event of early repayment, I think I and many
other courts would be reluctant to invalidate the Make-Whole Provision (or, especially, to
invalidate it in full), unless it turned out to be truly an unjustifiable penalty. And, of course,
unless the bondholders’ opponents won on every single one of the issues involving the 2016
Notes, the 2016 bondholders would have the better argument—again, as a state law matter—that
they’re still entitled to a recovery on the Make-Whole Provision, in some meaningful amount.
Slightly different issues would exist with respect to the 2026 Notes, whose
documentation is less extensive, and whose damages issues would be subject to only partly
similar analysis under state law. The “No-Call” provision in the First Supplemental Indenture to
the 2026 Notes Indenture states merely “Optional Redemption: None.”182 But there is no
definition of “Redemption” in either the Indenture, Supplement, or Notes. Also, while the 2026
Notes state that the Company “hereby promises to pay . . . the principal sum of 150,000,000
182 	Annex II to the First Supplemental Indenture to the 2026 Notes Indenture.
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Dollars on February 1, 2026,” 183 and the 2026 Notes have a materially different definition for
“Maturity,”184 the No-Call Provision does not tie its applicability to either of those formulations.
These factors, especially taken together, give rise to uncertainties as to how to deal with
the No-Call under state law, since I don’t know whether the repayment to which the bondholders
are entitled now can fairly be described, in the absence of more, as “Optional Redemption.” On
the 2026 Notes (as contrasted to the 2016 Notes), I believe that, as a matter of state law, the
bondholders might have Solutia problems—inadequate drafting to give them the state law rights
they wish to enforce—and it would be the bondholders’ opponents who’d have the stronger
argument.185
(b) The Bankruptcy Considerations Layer
The second layer of analysis would require consideration of any claims that were
allowable under state law under the different, and generally more restrictive, requirements of
federal bankruptcy law. I’d have to determine whether the particular provisions of the Code (or,
to the extent applicable, bankruptcy caselaw or policy) would require disallowance of such a
claim even if it might otherwise have validity under applicable nonbankruptcy law.186
183 	2026 Notes at 1.
184 	“‘Maturity,’ when used with respect to any Security, means the date on which the principal of such Security
or an instalment of principal becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.” 2026 Indenture § 101.
185 	As to the damages on the No-Call Provision in the 2026 Notes, I see no provision in their documentation
saying that the remedies for breach are limited to those expressly provided. So I would think that there’d
be a pretty good argument that damages for breach of the No-Call Provisions would be recoverable as a
matter of state law, presumably under the principles laid out in the TIAA Cases. While the Settlement uses
the 2016 Notes’ Make-Whole Provision as the proxy for the resulting damages, and the Equity Committee
questions the propriety of that, the issue a is a debatable one. A similar technique was utilized in Capline I.
See 365 B.R. at 400.
186 	A third layer might exist in some cases, though I don’t think anyone could seriously argue that it applies
here. If a bankruptcy case were filed with the purpose (or, arguably, a material purpose) of sidestepping a
no-call provision, or to avoid liability for a make-whole, such a circumstance would trouble me, and I think
that arguments to disallow claims based on either would be much weaker.
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Given that the key cases are in several material respects in conflict, I necessarily can’t
agree with all of them. Some of the things that I would care about have been addressed in the
cases to date, but others have not been—or have been addressed in less than all of the cases. I
take these in turn.
First, while I don’t think anybody could seriously argue that a no-call provision could
ever be specifically enforceable in bankruptcy,187 the extent to which a claim for damages for a
no-call’s breach would nevertheless be sustainable is a very different question.188 I’d suggest
that it’s an overly broad statement of the law, as stated in Calpine II, that “[b]ecause Debtor's
bankruptcy filing rendered the no-call provision in the notes unenforceable and liability cannot
be incurred pursuant to an unenforceable contractual provision, Debtor did not incur any liability
for repaying the notes.”189 While the notion of specific performance is generally repugnant to
bankruptcy policy, bankruptcy courts allow claims for damages for breaches of contracts they
won’t specifically enforce with great frequency. The Premier Entertainment Biloxi court—
187 	See, e.g., Scott K. Charles & Emil A. Kleinhaus, Prepayment Clauses in Bankruptcy, 15 ABI L. REV. 537,
563-64 (Winter 2007) (“Charles & Kleinhaus”) (collecting cases and stating that “the cases . . . agree on
one thing: [a] contractual prohibition on prepayment should not be specifically enforced in bankruptcy to
prevent prepayment”) (emphasis in original); Calpine II, 2010 WL 3835200 at *3 (quoting Charles &
Kleinhaus in that regard, though leaving out the seemingly quite important words “to prevent
prepayment”).
188 	Two sentences after noting the unavailability of specific performance, as quoted in n.187 above, Charles &
Kleinhaus continued: “[t]he real issue is whether, when a debtor prepays a loan in the face of no call, the
damages resulting from such prepayment should be allowed under the Bankruptcy Code.” Charles &
Kleinhaus, 15 ABI L. REV. at 564. Their article then discussed the “two approaches” in the cases as to that
issue. Id.
I think I’d likely ask, at the outset of any oral argument if called upon to decide the merits of the
controversy, whether the fact that specific performance is unavailable is irrelevant, and whether the issue of
the allowance of a claim for damages must instead be decided on what I’d consider to be more relevant
factors, several of which were addressed in Premier Entertainment Biloxi, including the circumstances
surrounding the early payment, the nature of any acceleration, whether such damages could be regarded as
a proxy for unmatured interest, and the relevance of the solvency of the debtor.
189 	Calpine II, 2010 U.S. Dist. LEXIS 96792 at *12; 2010 WL 3835200 at *4.
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properly, in my view—did exactly that. On this issue, I believe that the bondholders would have
by far the better argument.
Second, it’s at least arguable that in bankruptcy cases, make-whole premiums and
damages for breach of a no-call are proxies for unmatured interest—and that where unmatured
interest must be disallowed, they likewise should be disallowed. The cases on this are split. The
majority view says that they shouldn’t be disallowed, and the minority view says that they
should.190 Acceptance of the majority view would favor lenders with such provisions, while
acceptance of the minority view would favor estates and the other creditors (and as relevant here,
the Equity Committee). I personally find analysis in Charles & Kleinhaus,191 which
accompanies its discussion of the conflicting caselaw,192 rather persuasive, and subject to parties’
rights to be heard, might thus favor the minority view—though (as noted below) I think this
could be relevant only in the case of an insolvent debtor, which we don’t have here. I any event,
I think this issue must be regarded as still open.
190 	See Charles & Kleinhaus, 15 ABI L. REV. at 580 (“Most cases to consider the issue have concluded that
claims based on prepayment clauses are not claims for unmatured interest. . . . The minority view is that a
claim based on a prepayment fee is a claim for unmatured interest. . . . The same logic has been applied to
damages for breach of a no call, which are likewise intended to compensate lenders fully for lost interest
income.”) (emphasis in each case in the original).
191 	As noted there:
Reading section 502(b)(2) to disallow a claim for unmatured interest,
but not a claim for the present value of that interest, is difficult to
defend. A better reading of section 502(b)(2) is that it disallows
unsecured claims for interest or its equivalent that are “unmatured” as
of the petition date. Under that reading, if the right to the present value
of interest “matures” after the petition date (for example, when a no call
is breached), section 502(b)(2) could not be avoided by distinguishing
that right from the right to unmatured interest that existed just before
the breach.
Id. at 581 (emphasis in original).
192 	See id. at 581-82.
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Third, though Premier Entertainment Biloxi discusses how the allowance of claims for
breach of a no-call may be affected by a debtor’s solvency,193 the other cases don’t—probably
because cases involving solvent debtors are so rare. Premier Entertainment Biloxi permits
allowance of such a claim under those circumstances, and in a solvent debtor situation, I think
there’s a good likelihood that other courts will as well. While I, like Charles & Kleinhaus,
assume “that section 502(b)(2)’s disallowance of unmatured interest is operative”194 in the much
more common chapter 11 cases where the debtor is insolvent, I believe that it’s at least strongly
arguable, as Charles & Kleinhaus states in its following sentence, that “[this] assumption[], as
well as other assumptions predicated on the Bankruptcy Court's equitable discretion over the
distribution of estate property, [is] not applicable in solvent cases.”195
The Sixth Circuit has held that in a solvent debtor case, a “bankruptcy judge does not
have free floating discretion to redistribute rights in accordance with his personal views of justice
and fairness;” rather, “it is the role of the bankruptcy court to enforce the creditors’ contractual
rights.”196 Similarly, the First Circuit, upholding the award of what it referred to as a
“prepayment penalty” from a solvent debtor, has held that “[w]hen the debtor is solvent, ‘the
bankruptcy rule is that where there is a contractual provision, valid under state law, . . . the
bankruptcy court will enforce the contractual provision.”’197 In an analysis that I once more find
persuasive, Charles & Kleinhaus note that a distinction should be made between insolvent and
193 	See Premier Entertainment Biloxi, 2010 Bankr. LEXIS 2994 at *145-*147, 2010 WL 3504105 at *41-*42
(debtor was solvent, and since, “when a debtor is solvent, bankruptcy courts generally will enforce the
debtor’s contractual obligations to the extent they are valid under applicable state law,” considering
solvency as an important factor in determining whether to allow damages for breach of a no-call).
194 	Charles & Kleinhaus, 15 ABI L. REV. at 582.
195 	Id.
196 	In re Dow Corning Corp., 456 F.3d 668, 679 (6th Cir. 2006) (internal quotation marks omitted).
197 	Gencarelli v. UPS Capital Bus. Credit, 501 F.3d 1, 7 (1st Cir. 2007) (“Gencarelli”) (quoting
Debentureholders Protective Comm. of Cont’l Inv. Corp. v. Cont’l Inv. Corp., 679 F.2d 264, 269 (1st Cir.
1982)).
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solvent debtors when enforcing no-call and make-whole provisions.198 With a solvent debtor,
issues as to fairness amongst creditors, in sharing a limited pie, no longer apply; the allowance of
claims under a make-whole provision, or for damages for breach of a no-call, no longer comes at
the expense of other creditors. Thus it’s at least arguable, as stated in Charles & Kleinhaus, that
“[t]he effect of prepayment clauses in solvent cases, therefore, should be an issue of state law
alone.”199 While using a somewhat dated expression—“prepayment penalties”—that I
personally wouldn’t use, or favor, Gencarelli holds exactly that.
And damages for breach of a no-call might be regarded similarly. These too would in my
view be objectionable when the debtor is insolvent and when recovery for such comes at the
expense of other creditors. But those considerations don’t apply when the debtor is solvent.
(c) Summary
Stepping back to look at all of these considerations at a distance, I think that as matters of
state law, the bondholders’ position to an entitlement in some amount under the 2016 Notes is
stronger than their position on the 2026 Notes, by reason of the better language for the
bondholders in the 2016 Notes.200 That difference results in a situation where I think that, as a
state law matter, the bondholders have somewhat the better of the argument on the 2016 Notes,
and their opponents have somewhat the better of the argument on the 2026 Notes.
As matters of bankruptcy law, since we here have a solvent debtor, I think the
bondholders are likely to get whatever they’re entitled to under state law, on both issues of notes.
198 	Charles & Kleinhaus, 15 ABI L. REV. at 582-84.
199 	Charles & Kleinhaus 15 ABI L. REV. at 584.
200 	I’m not in a position now to conclude that there would be any imperfections in the crafting of the 2016
Notes’ Make-Whole Provision, or that if there were any, that they’d make it wholly unenforceable.
Arguments as to each of those issues could be made in favor of either position, and I see no side that I’d
regard as clearly superior.
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Here, the claims on the 2016 Notes’ Make-Whole Provision were settled for
approximately 42% of their asserted value, and the claims on the 2026 Notes’ No-Call Provision
were settled for approximately 39% of their asserted value. Obviously, each was at a level of
less than 50%—though that might reflect an amalgam of assumptions as to liability and
damages.
I don’t think settlements at that level were unreasonable when they were entered into, and
I especially don’t regard them as unreasonable now. Taking into account the new thinking in the
area, as articulated in Calpine II and Premier Entertainment Biloxi, the bondholders’ position is,
at most, no weaker. The very thorough decision in Premier Entertainment Biloxi, if followed by
other courts (as I think is likely), helps the bondholders in several respects, especially since it too
involved a solvent debtor case. And I don’t find Calpine II to materially alter the terrain since
the Settlement was entered into. Analysis in Calpine II as to the effect of the language in the
CalGen bonds has limited applicability to the different language here. And as I’ve noted
above,201 one of the Calpine II legal premises is at the least subject to debate.
The Settlement, insofar as it allocates value to satisfy alleged liability on the part of the
Debtors on account of the No-Call and Make-Whole Provisions, is well within the “range of
reasonableness.”
iii. Other Settlement Components
Other aspects of the Settlement require only brief mention. Settling with the PBGC was
entirely sensible. The wisdom of the notion that the Debtors should push their pension funding
issues off to another day, and risk a termination of their pension plans by the PBGC, would be
debatable, at best, even if I could consider the merits. And if the Debtors had not settled, they
201 	See page 61 supra.
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may well have had to create a huge reserve for satisfying plan termination claims by the PBGC.
But again we consider settlements as to be within or without the range of reasonableness. And
just as the Debtors did not want to push their leverage up to excessively high levels, their
decision to be responsible, and to work out a mutually satisfactory deal with the PBGC, is hardly
to be faulted—and again, is well within the range of reasonableness.
Similarly, while commitments to pay the legal fees of non-fiduciary creditor groups tend
to fuel the litigiousness of large chapter 11 cases, and while the propriety of commitments of that
character, in the various procedural contexts in which such commitments are made, is still an
open issue,202 the Settlement was struck in a manner that is inoffensive. If I later conclude that
those fees may not be paid under a Plan, the Bondholders Committee can seek payment for
“substantial contribution,” and I’ll be free to rule on such a request, as I see fit, at that time. The
Debtors’ agreement not to oppose a bondholder request for payment, which has substantial
precedent behind it, is particularly inoffensive.
iv. Other Iridium Factors
Finally, I’ll briefly discuss the less vigorously litigated of the Iridium and TMT factors.
When the Settlement was originally negotiated, there was certainly reason to believe that
if the Settlement was not approved, protracted litigation would result. That was the case then,
and it still is the case now. In light of the amount of money at stake, which is potentially
upwards of $150 million in the case of the No-Call and Make-Whole claims, there is no reason to
believe that these claims would be abandoned by bondholders, especially with their ability to
rely on Calpine I, to question one of the two underpinnings of Calpine II, and to rely on a well-
reasoned analysis in Premier Entertainment Biloxi. If the Debtors continued to litigate those
202 	I have that issue sub judice in the Adelphia cases.
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issues, they would need to remain in chapter 11, incurring several millions of dollars in
administrative expenses each month, or could emerge from chapter 11 only after having tied up
huge sums in a reserve pending the resolution of those claims.
While it is not clear to me that ruling on bondholder entitlements would require an
evidentiary hearing, the legal issues by themselves are many and complex, as the lengthy
decision in Premier Entertainment Biloxi, which addresses them on the merits, graphically
demonstrates. Dealing with them would be expensive and time-consuming.
Another Iridium factor calls upon the court to consider the parties and proportion of class
members that support or oppose the settlement. But this factor, which has its origin in
nonbankruptcy litigation (and particularly the review of class action settlements, which usually
focus on fairness to the plaintiff and class member communities, as contrasted to the defendant
putting value on the table), has limited applicability in bankruptcy cases. In the latter, we
bankruptcy judges nearly always see diverse constituencies fighting over their respective
recoveries, in what often is a zero sum game. Though more than a few settlements by chapter 11
debtors help constituencies across the board, others not infrequently tend to favor, as a practical
matter, one constituency or another. In those cases, it is natural that some constituencies will
like the settlement, and others will not. As I noted in one of my Adelphia decisions,203 when
considering this factor in approving the Debtors’ settlement with the SEC and Department of
Justice, which was favored or unopposed by some constituencies but opposed by others:
[I]n my view, the approval of a settlement cannot be regarded as a counting
exercise. Rather, it must be considered in light of the reasons for any opposition,
and the more fundamental factors-such as benefits of settlement, likely rewards of
litigation, costs of litigation and downside risk-described above. That is
particularly so in cases like this one where a debtor's board is the fiduciary for all
parties in interest, who naturally have competing interests with respect to limited
203 	Adelphia DoJ/SEC Settlement Decision, 327 B.R. at 143.
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assets that are insufficient to satisfy everyone's needs and concerns. In such
cases, where the settlement proponent is trying to maximize value for all, or to
minimize risk for all, concerns of that character plainly trump the head count in
support.204
It is no more logical to place material reliance on the Equity Committee’s opposition than
it would be to rely on the Creditors’ Committee’s and Bondholders’ Committee’s support—or
vice versa. This factor has no material bearing on the reasonableness of the Settlement here.
Another factor is the competence and experience of the counsel who support the
Settlement. No argument has been made, nor could any argument be made, that the counsel who
put the Settlement together were anything less than highly skilled in their craft, and
knowledgeable in the considerations underlying a settlement of this character.
The breadth of the releases, another Iridium factor, is not a material factor in the analysis
of this Settlement. And as discussed below, the Plan contemplates that to the extent that I have
any problems with the releases, they’ll automatically be fixed.
Most or all parties in this case—including, I think even the Equity, will benefit from the
Settlement. Though the Equity Committee objects to it, it is hardly clear to me that Equity
would do better if the bondholders’ claims were litigated. If the bondholders prevailed, Equity
would be the victim.
Finally, I find that the Settlement was truly the product of arms-length bargaining, and
not fraud or collusion. It passes all of Iridium’s requirements easily.
3. Other Objections
A. Good Faith
Section 1129(a)(3) of the Code provides that a reorganization plan must be “proposed in
good faith and not by any means forbidden by law.” The proponent of confirmation bears the
204 	Id. at 165 (emphasis in original).
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burden of proof by a preponderance of the evidence.205 Good faith is “generally interpreted to
mean that there exists a reasonable likelihood that the plan will achieve a result consistent with
the objectives and purposes of the Bankruptcy Code.”206 A plan is proposed in good faith only if
it has “a legitimate and honest purpose to reorganize the debtor.”207
Whether a reorganization plan has been proposed in good faith must be viewed in the
totality of the circumstances,208 and the requirement of Section 1129(a)(3) “speaks more to the
process of plan development than to the content of the plan.”209 “The bankruptcy judge is in the
best position to assess the good faith of the parties’ proposals.” 210 I find the good faith
requirement to have been satisfied in this case.
The Plan has been proposed by the Debtors, the Creditors’ Committee, and the
Bondholders’ Committee. Although the Equity Committee does not support the Plan, I find that
the Debtor’s negotiated honestly and at an arm’s length, including with the Equity Committee, in
an effort to create a confirmable plan that would satisfy all parties.
I also find that the Debtors were flexible and responsive to the Equity Committee’s
concerns. In my July 21 decision on the Equity Committee’s Motion to Terminate Exclusivity
(“Exclusivity Termination Decision”), I noted that the Debtors met with the Equity Committee
on more than 20 occasions and nearly reached an agreement with the Equity Committee on a
confirmable plan in May 2010. As explained by Mr. Forsyth, it was not until the Equity
205 	In re Quigley Co., Inc. 2010 WL 3528818, *12 (Bankr. S.D.N.Y. 2010) (Bernstein, J.).
206 	Matter of Madison Hotel Associates, 749 F.2d 410, 425 (7th Cir. 1984) (internal quotations omitted);
Mercury Capital Corp. v. Milford Conn. Assocs., L.P. 354 B.R. 1, 7 (D. Conn. 2006) (“Mercury Capital”).
207 	Mercury Capital, 354 B.R. at 7 (quoting In re Elsinore Shore Assoc., 91 B.R. 238, 260 (Bankr. D.N.J.
1988)) accord Kane v. Johns-Manville Corp., 843 F.2d 636, 649 (2d Cir.1988) (“The good-faith test means
that the plan was proposed with honesty and good intentions and with a basis for expecting that a
reorganization can be effected.”).
208 	See In re Jasik, 727 F.2d 1379, 1383 (5th Cir. 1984) (“Jasik”).
209 	In re Bush Industries, Inc., 315 B.R. 292, 304 (Bankr. W.D.N.Y. 2004).
210 	Jasik, 727 F.2d at 1383.
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Committee determined not to proceed on that agreement, as discussed at a June 3 meeting, that
the Debtors reached an agreement with the Creditors’ and Bondholders’ Committee to put
forward the current Plan. I found that these events “in the aggregate . . . demonstrate a good
faith effort on the part of the debtor to consider the needs and concerns of all major
constituencies in this case, most certainly and including the equity.”211 The Equity Committee
does not now contest the willingness of the Debtors to negotiate with it, and the fact that the
Debtors and Equity Committee did not reach an agreement in the end does not indicate a lack of
good faith.
I also find that Debtors’ management cooperated with the Equity Committee in its effort
to market Chemtura. The Debtors negotiated and signed non-disclosure agreements with 7
potential investors. Senior management of the Debtors met with two significant investors on two
separate occasions in June and later provided them with information and answered their follow-
up questions.
During the course of this bankruptcy, the Debtors negotiated and reached agreements
with many other parties, such as state and federal environmental regulators and Diacetyl
claimants. The settlements, many of which I’ve already approved, are indicative of the Debtors’
genuine efforts to reach consensual resolutions with other parties in interest. Moreover, the fact
that the Debtors negotiated and settled so many claims after they believed Chemtura to be
solvent is further evidence of real efforts made by the Debtors to maximize the recovery to
Equity.
The Debtors were unwilling to support an alternative plan by the Equity Committee
because they believed that it would place too much debt on the reorganized Debtors. The Equity
211 	Tr. of Hg. of July 21, 2009, ECF # 3415, at 75.
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Committee has argued that the Debtors’ desire to emerge quickly and with a low leverage plan
became the only real factor that they considered in negotiating a plan. But I find that it was
reasonable for management to be interested in confirming a plan that, in its business judgment,
had sufficiently low leverage to allow for a successful reorganization. As I noted in the
Exclusivity Termination Decision, and as the past two years have demonstrated, “…even healthy
companies can be materially affected by substantial debt loads, especially secured debt loads.” 212
As all settlements require compromise on both sides, the fact that the Debtors were willing to
provide concessions to garner support for their low-leverage plan does not preclude a finding of
good faith.
B. Releases and Exculpation
The Equity Committee also objects to third-party releases, and possibly, similar
exculpation provisions in the Plan, in each instance, under which parties other than the
Debtors—Equity, for example—would release claims against entities other than the Debtors
themselves.213 I agree with the Equity Committee’s underlying concerns in this regard; the
releases are plainly impermissible under the applicable caselaw, including, most obviously, the
Second Circuit’s decision in Metromedia214 and my earlier decision in Adelphia.215 But as the
Plan has “self-correction” features,216 the deficiencies don’t make the Plan unconfirmable. They
212 	Tr. of Hg. of July 21, 2009, ECF # 3415, at 90.
213 	Here the “Released Parties” include the Debtors’ officers and directors, the Creditors’ Committee, the
Bondholders Committee, the bonds’ indenture trustees, the DIP facility agent and lenders, the PBGC, and
professionals and employees for each of them. See Plan Section 11.3.
214 	Deutsche Bank AG v. Metromedia Fiber Network, Inc. (In re Metromedia Fiber Network, Inc.), 416 F.3d
136 (2d Cir. 2005) (“Metromedia”).
215 	See In re Adelphia Communications Corp., 368 B.R. 140, 266 (Bankr. S.D.N.Y. 2007), stay temporarily
granted, 361 B.R. 337 (S.D.N.Y. 2007), appeal dismissed, 371 B.R. 660 (S.D.N.Y. 2007), aff’d, 544 F.3d
420 (2d Cir. 2008) (“Adelphia Confirmation Decision”).
216 	See Plan Art. 11.3 (“As of the Effective Date, to the extent permitted by applicable law . . .”) (emphasis
added). This language was added to Article 11.3 (the “third-party releases”) in the Debtors’ Technical
Amendments to the Plan, ECF # 3984.
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merely require that the releases be limited to “the extent permitted by applicable law” —which
means, as a practical matter, that they be declared unenforceable. I so declare, and the
confirmation order must so state.
Whether they’re called “exculpation provisions” (principally dealing with the post-
petition period) or “third-party releases” (applying more broadly), the challenged provisions here
are in a now-familiar pattern, which we see in nearly every chapter 11 case. Like those that I
addressed in my earlier decisions in Adelphia and DBSD, 217 the provisions here involve claims
owned by third parties (e.g., stakeholders in the case, including holders of equity), against other
third parties (e.g., other stakeholders), against whom the former may have grievances. As I
noted in DBSD, exculpation provisions are included so frequently in chapter 11 plans because
stakeholders all too often blame others for failures to get the recoveries they desire; seek
vengeance against other parties; or simply wish to second guess the decisionmakers in the
chapter 11 case.218 Third-party releases, though perhaps to a lesser degree, have a similar
purpose.
But as I also noted in DBSD, though exculpation provisions have a salutary purpose, that
salutary purpose is insufficient by itself to make them proper as a general rule. The same is true
There is no analogous language in Article 11.6 (the “exculpation” provisions) of the Plan. However,
Article 15.9 (the “Severability Clause”), which applies to all articles of the Plan, provides an alternative
means of self-correction for the exculpation provisions. It states:
If, before Confirmation of the Plan, any term or provision of the Plan is
held by the Bankruptcy Court or any other court exercising jurisdiction
to be invalid, void or unenforceable, the Bankruptcy Court or other
court exercising jurisdiction shall have the power to alter and interpret
such term or provision to make it valid or enforceable to the maximum
extent practicable, consistent with the original purpose of the term or
provision held to be invalid, void or unenforceable, and such term or
provision shall then be applicable as altered or interpreted. . . .
Plan Art. 15.9.
217 	See DBSD, 419 B.R. at 217-19.
218 	See id. at 217.
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with respect to third-party releases. As the Second Circuit's decision in Metromedia and my
earlier decision in Adelphia clearly provided, exculpation provisions (and their first cousins, so-
called “third party releases”) are permissible under some circumstances but not as a routine
matter. They may be used in some cases, including those where the provisions are important to a
debtor’s plan; where the claims are “channeled” to a settlement fund rather than extinguished;
where the enjoined claims would indirectly impact the debtor's reorganization by way of
indemnity or contribution; where the released party provides substantial consideration; where the
plan otherwise provides for the full payment of the enjoined claims; or where creditors consent.
But we have none of those circumstances here. While in DBSD, I upheld some of the releases
based on creditor consent, I did so on a factual record where creditors’ ballots gave them the
opportunity to opt out of the releases and they did not do so. And I disallowed them, for the
most part, where the requisite consent was lacking.219
The Plan Supporters have not seriously contended here that these releases may be upheld
based on consent.220 Rather, they have made what in substance was the same argument I
considered and rejected in Adelphia—that they should get them because of the benefits of the
settlement, supposedly extraordinary efforts in reaching a deal, or give-ups as part of that deal.
Here, as in Adelphia, what we saw was simply what chapter 11 contemplates. As I held in
Adelphia:
The “give-ups” that parties made were of rights to recover that were subject to fair
debate. In the case of creditors, even those that are Settling Parties, they were
merely striking the kinds of deals with respect to their shares of the pie that
chapter 11 contemplates. I don't doubt that in this case the Settling Parties
219 	See id. at 218.
220 	But cf. Debtors Br. at 73 (because “most” holders of claims will receive payment in full, and because this
will be a “nearly” consensual plan, third-party releases are proper with respect to “these holders” of claims
because they are being made whole under the Plan, and their votes in favor of the Plan “effectively indicate
their consent” to the releases).
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engaged, as the Plan Proponents argue, in “tireless efforts” to come together to
work out a global compromise aimed at resolving these cases. But that's not
unique. It's something creditors have to do in every chapter 11 case, at the risk of
destroying themselves (or their recoveries in the case) with their own quests for
incremental recoveries.221
Similarly, the releases don’t become acceptable because they were part of the Global
Settlement. I dealt with this too in Adelphia. In language as applicable here as it was then, I
said:
Nor can I accept the notion that the releases pass muster under Metromedia
because the Settling Parties elected to make them an element of their deal. First,
of course, they provided that their releases and exculpation would remain only to
the extent permissible under applicable law—fully recognizing, it appears, that
their enforceability was at least debatable. But even if they had not, I could not
approve them. It would set the law on its head if parties could get around it by
making a third party release a sine qua non of their deal, to establish a foundation
for an argument that the injunction is essential to the reorganization, or even “an
important part” of the reorganization. 222
Thus, I can’t approve these exculpation provisions and third-party releases. However, as
noted, the Plan as drafted provides for two applicable safety valves,223 and that makes the Plan
confirmable notwithstanding the deficiencies. Thus I cut back on the scope of the releases, but
find that their deficiencies do not bar confirmation of the Plan.224
However, I recognize here, as I did in Adelphia, the legitimate needs and concerns of
parties to seek protection from frivolous claims of other stakeholders.225 The parties in this case
already should have substantial peace of mind in that regard, because, as in Adelphia and most
221 	Adelphia Confirmation Decision, 368 B.R. at 268-69.
222 	Id. at 269.
223 	See Plan Arts. 11.3 and 15.9, discussed supra n.216.
224 	The Equity Committee also contends that releases given by the Debtors of claims the Debtors themselves
own—most significantly, any they might have against their management—are inappropriate. Here I
disagree. No potential claims were identified. Debtors may release claims they themselves own. See
Adelphia Confirmation Decision, 368 B.R. at 263 n.289; Oneida Ltd., 351 B.R. at 94 n.21. Irrespective of
whether the release of claims of that character is governed by a best interests of the estate or merely a
business judgment standard, I see no basis for finding such releases to be inappropriate.
225 	See Adelphia Confirmation Decision, 368 B.R. at 263 n.289.
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cases, “the great bulk of any claims would at least seemingly belong to the Debtors, and not
individual creditors, and the Debtors undisputedly could, and will, release any such claims. And
targets of litigation will also have the benefit of res judicata.”226
But consistent with my ruling in Adelphia, I’ll include a provision in the Confirmation
Order, if such is desired, providing (subject to any subject matter jurisdiction limitations) for
exclusive jurisdiction in this Court to consider any claims concerning matters for which the
released parties might wish protection to the extent that they involve the administration of the
estates during the course of these chapter 11 cases, or my earlier rulings and orders in these
cases. I’ll be able to tell the difference between legitimate claims, on the one hand, and
harassment, retaliation, or frivolous litigation, on the other. Any claims hereafter brought will
not be released in advance, but they will be subject to Rule 9011.
C. Dissolution of Equity Committee
The Equity Committee also raises an objection to Article 15.3 of the Plan,227 which
provides, in substance, for dissolution of the Equity Committee on the Effective Date.228 The
Equity Committee argues, partly expressly and partly impliedly, that this could be used to deny it
standing in future proceedings, most significantly in connection with any appeal from the
226 	Id.
227 	Pruning it to include on the most relevant clauses, Article 15.3 provides:
On the Effective Date, the Creditors’ Committee and the Equity
Committee shall dissolve, except: . . . (i) to the extent that Class 13a for
Chemtura Corporation has voted to reject the Plan, with respect to the
resolution of applications for Accrued Professional Compensation and
all disputes regarding allowance of Disputed Claims . . . On the
Effective Date, subject to the proviso above, the members of the
Creditors’ Committee and the Equity Committee shall be released and
discharged from all rights and duties from or related to the Chapter 11
Cases.
Plan Art. 15.3.
228 	While in its Objecting Brief, the Equity Committee misspoke in its main text and referred to the
“confirmation date” (Equity Comm. Obj. Br. at 51), it got it right when it quoted the relevant portion in the
footnote quoting the provision, and the issue is almost as relevant when one speaks of the Effective Date.
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Confirmation Order. The Debtors respond (after discussing largely immaterial matters) that
“[t]he Plan does not preclude any Equity Holder, as a party in interest in the Chapter 11 Cases,
from pursuing an appeal from an order approving confirmation of the Plan, it merely provides
that the estates are not required to fund that appeal.”229
I well understand the Debtors’ desire not to fund any appeal. Bankruptcy judges are
painfully familiar with the litigiousness of large bankruptcy cases, fueled in material part by the
phenomenon (present especially with official committees, but also with ad hoc committees who
look to estates for the payment of their fees) that those whose fees are paid by someone else have
no incentive to keep costs under control, or to bring the litigiousness to an end.
But the Debtors’ silence is deafening with respect to a disclaimer of any future effort to
deny the Equity Committee standing on appeal after the Plan goes effective. If the Debtors never
intended that, they could have said so much more clearly. While the Debtors should be free to
make the obvious mootness arguments (and I have every expectation that they will), I think that
trying to contend that the Equity Committee no longer exists, and thus to deny the Equity
Committee its section 1109 standing, would go too far.230 If plan proponents or supporters
intended to deprive the Equity Committee of appellate standing, it would raise issues under Code
sections 1129(a)(1), (2) and (3).
I therefore agree with the Equity Committee that Plan Article 15.3, if not cleaned up, is
objectionable. But though I find fault with this provision, as mentioned above, the Plan provides
for a self-correcting mechanism, and as a result, is still confirmable. The Severability Clause of
229 	Debtors’ Reply Br. at 47.
230 	The Debtors quote my Adelphia confirmation decision, 368 B.R. at 276, suggesting that it would support
their position here. But a review of the decision of the district court in that case, see 371 B.R. at 663 n.2,
reveals the presence of a later consent order providing that “notwithstanding provisions of the Plan
providing for the Equity Committee’s termination, the Equity Committee shall remain in existence for
several limited purposes, including the prosecution of its appeal of the Confirmation Order” —addressing
the concern I have here, and providing for what I’ll insist on here.
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Article 15.9 of the Plan, already voted on by stakeholders, empowers this Court, before
confirmation, to amend any provision of the Plan to make it valid or enforceable.231 For these
reasons, Article 15.3 can and must be cured by adding one or more provisos to the Plan and
confirmation order providing, in substance (similar in material respects to the Adelphia consent
order):
provided that notwithstanding any provisions of the Plan or confirmation order
providing for the Equity Committee's termination, the Equity Committee shall
remain in existence to the extent necessary for the prosecution of any appeal of
the Confirmation Order; but provided further that nothing in the Plan or
confirmation order, or by reason of the preceding proviso, shall obligate the
reorganized debtors or any other party in interest to pay any legal fees or expenses
incurred by the Equity Committee in connection with such efforts. 232
4. Miscellaneous Objections
I don’t think I should lengthen this decision further by specifically addressing any of the
other objections that were raised on this motion, such as that by equity holder Interlachen
Investcorp., which objects to an incentive plan that was agreed to by the other stakeholders
(saying it unduly prejudices Equity) and argues for a plan that would provide for greater
leverage.233 I’ve canvassed them and satisfied myself that no material objections other than
those I’ve specifically addressed were raised and have merit. To the extent those objections were
not expressly addressed in this decision, they’re overruled.
Conclusion
For the foregoing reasons, the Plan will be confirmed, if amended in accordance with
Sections 3(B) and 3(C) of the Discussion in this Decision. An amendment to the Plan to meet
the requirements of Section 3(C) will not require resolicitation. The Debtors are to submit for
231 	See supra n.216, quoting the Severability Clause of Plan Article 15.9.
232 	I’d have no objection to any reasonable modifications of that language, so long as consistent with its
purpose.
233 	See Interlachen Investcorp. Confirmation Obj. Br., ECF # 3848.
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my consideration and signature a separate confirmation order, and they may, if desired, also
submit Findings of Fact and Conclusions of Law (either free-standing or as part of the
confirmation order) supplementing those in this Decision so long as they’re not inconsistent with
it.
The time to appeal from the resulting confirmation order will run from the time of its
entry, and not from the time of entry of this Decision.
Dated: New York, New York 	s/Robert E. Gerber
October 21, 2010 	United States Bankruptcy Judge
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