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Castleton: 7th Circuit's Answer to 203 N. LaSalle's Market Test

Published in American Bankruptcy Institute Journal
Article | December 2015

This article examines the market test for new-value Chapter 11 plans articulated by the US Supreme Court in 203 N. LaSalle and the divergent approaches taken by courts to satisfy it, culminating in the Seventh Circuit's In re Castleton Plaza LP decision. While some courts have advocated that a creditor’s ability to file its own plan, assisted, if necessary, by the termination of a debtor's plan exclusivity could by itself satisfy the market test. The Castleton decision rejected this approach, holding that the need for competition and requirement that the reorganized debtor's equity garner top dollar compelled that the equity be subjected to an auction.

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