In re New Valley Corp.

168 B.R. 73 (1994)

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In re New Valley Corp.

United States Bankruptcy Court for the District of New Jersey
168 B.R. 73 (1994)

Facts

Several creditors filed an involuntary-bankruptcy petition against New Valley Corporation (debtor). New Valley filed a reorganization plan that provided for unsecured creditors to be paid in full in cash on the date the plan became effective. New Valley was solvent, and its overall value exceeded its liabilities. The creditors asserted that they should be paid postpetition interest on their claims against New Valley. New Valley objected. Before the enactment of the Bankruptcy Code (code), common law gave some creditors the right to postpetition interest from a solvent debtor. Section 502(b)(2) of the code specified that creditors’ claims on unmatured interest were disallowed. Section § 1124 stated that creditors who were to receive the amount of their prepetition claims in cash would be considered unimpaired in a reorganization plan and would be deemed to accept the plan. Section 1129(a)(7)(A)(ii) set out a best-interests-of-creditors test, under which creditors were entitled to postpetition interest under some circumstances. Creditors’ rights to postpetition interest were determined by the interplay of these sections. New Valley argued that its financial stability would be jeopardized if it were obliged to pay postpetition interest.

Rule of Law

Issue

Holding and Reasoning (Winfield, J.)

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