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Supreme Court Disappoints Secured Lenders

By Michael L. Cook and Leslie W. Chervokas

The U.S. Supreme Court's recent Till decision on the proper cramdown interest rate will disappoint secured lenders. Till v. SCC Credit Corp., 124 S. Ct. 1951 (2004). As we show below, Till should be limited to its narrow fact pattern, but is still bad news for lenders. They now will be forced to fight an uphill battle to prove that a higher risk premium should be added to the prime rate applicable to their crammed down secured claim. In Till, the plurality accepted a risk adjustment premium in the range of 1% to 3% (Justice Thomas, concurring, could accept no premium at all). Commercial lenders will thus have to overcome Till by showing that they are entitled to a truly “market” interest rate.

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