     15-1771; 15-1682; 15-1824
     In re MPM Silicones, LLC



 1                                       In the
 2                United States Court of Appeals
 3                               For the Second Circuit
 4
 5                                      ________
 6
 7                         August Term, 2016
 8   ____________________________________________________________
 9
10                 In the Matter of: MPM Silicones, L.L.C.
11   ____________________________________________________________
12
13                          Nos. 15-1682 (L); 15-1824 (CON)
14
15      MOMENTIVE PERFORMANCE MATERIALS INCORPORATED, APOLLO
16     GLOBAL MANAGEMENT, LLC, AD HOC COMMITTEE OF SECOND LIEN
17                             HOLDERS,
18                        Plaintiffs-Appellees,
19
20                                         v.
21
22    BOKF, NA, AS FIRST LIEN TRUSTEE, WILMINGTON TRUST, N.A., AS 1.5
23                             LIEN TRUSTEE,
24                         Defendants-Appellants.
25   ____________________________________________________________
26
27                                     No. 15-1771
28
29         U.S. BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE,
30                          Plaintiff-Appellant,
31
32                                         v.
33
 1   WILMINGTON SAVINGS FUND SOCIETY, FSB, AS SUCCESSOR INDENTURE
 2   TRUSTEE, MOMENTIVE PERFORMANCE MATERIALS INCORPORATED, AD
 3        HOC COMMITTEE OF SECOND LIEN NOTEHOLDERS, APOLLO
 4       MANAGEMENT, LLC, AND CERTAIN OF ITS AFFILIATED FUNDS,
 5                        Defendants-Appellees.
 6   ____________________________________________________________
 7
 8               Appeals from the United States District Court
 9                 for the Southern District of New York.
10                         Vincent L. Bricetti, Judge.
11                                 ________
12
13                       Submitted: November 9, 2016
14                        Decided: October 20, 2017
15                                ________
16
17           Before: CABRANES, POOLER, and PARKER, Circuit Judges.
18                                  ________
19          Three groups of creditors separately appeal a judgment of the
20   United States District Court of the Southern District of New York
21   (Bricetti, J.) affirming the confirmation of Debtors’ Chapter 11
22   reorganization plan by the U.S. Bankruptcy Court (Drain, J.). The
23   creditors argue that the plan improperly eliminated or reduced the
24   value of notes they held. Debtors argue that the plan was properly
25   confirmed and that these appeals should be dismissed as equitably
26   moot. With one exception, we conclude that the plan confirmed by the
27   bankruptcy court and affirmed by the district court comports with the
28   provisions of Chapter 11. We remand so that the bankruptcy court can
29   address the single deficiency we identify with the proceedings below
30   which is the process for determining the proper interest rate under the
31   cramdown provision of Chapter 11. We decline to dismiss these
32   appeals as equitably moot.
33                                  ________
34
35


                                       2
1    DOUGLAS HALLWARD-DRIEMEIER, Ropes & Gray
2    LLP, Washington D.C.; MARK R. SOMERSTEIN, MARK
3    I. BANE , Ropes & Gray, New York, NY, for
4    Wilmington Trust, National Association as Indenture
5    Trustee for the 1.5 Lien Notes.

 6   DANIELLE SPINELLI, JOEL MILLAR, Wilmer Cutler
 7   Pickering Hale and Dorr LLP, Washington, D.C.;
 8   PHILIP D. ANKER, ALAN E. SCHOENFELD, Wilmer
 9   Cutler Pickering Hale and Dorr LLP, New York,
10   NY; MICHAEL J. SAGE, BRAIN E. GREER, Dechert LLP,
11   New York, NY, G. ERIC BRUNSTAD, JR., Dechert LLP,
12   Hartford, CT, for BOKF, NA as First Lien Trustee.
13
14   SUSHEEL KIRPALANI, Quinn Emanuel Urquhart &
15   Sullivan, LLP, New York, NY; ROY T. ENGLERT, JR.,
16   MARK T. STANCIL, ALAN E. UNTEREINER, MATTHEW
17   M. MADDEN, Robbins, Russell, Englert, Orseck,
18   Untereiner & Sauber LLP, Washington, D.C., for
19   U.S. Bank National Association, as Indenture Trustee.
20
21   IRA S. DIZENGOFF, ABID QURESHI, BRIAN T. CARNEY,
22   Akin Gump Strauss Hauer & Feld LLP, New York,
23   NY; PRATIK A. SHAH , JAMES E. TYSSE, Z.W. JULIUS
24   CHEN, Akin Gump Strauss Hauer & Feld LLP,
25   Washington, D.C., for Momentive Performance
26   Materials Inc. and Apollo Management, LLC, and
27   certain of its affiliated funds.
28
29   JOSEPH T. BAIO, JAMES C. DUGAN, Willkie Farr &
30   Gallagher LLP, New York, NY, for Momentive
31   Performance Materials Inc.
32
33   DENNIS F. DUNNE, MICHAEL L. HIRSCHFELD ,
34   Milbank, Tweed, Hadley & McCloy LLP, New
35   York, NY, for Ad Hoc Committee of Second Lien
36   Noteholders.

                     3
 1                             SETH H. LIEBERMAN, PATRICK SIBLEY, Pryor
 2                             Cashman LLP, New York, NY, for Wilmington
 3                             Savings Fund Society, FSB, as Successor Indenture
 4                             Trustee.
 5
 6                             RONALD J. MANN, Columbia Law School, New
 7                             York, NY, for Amici Curiae Loan Syndications and
 8                             Trading Association, the Managed Funds Association,
 9                             and the Securities Industry and Financial Markets
10                             Association.
11                                          ________

12   BARRINGTON D. PARKER, Circuit Judge:
13         These appeals by three groups of creditors challenge various
14   aspects of Appellee Momentive Performance Materials, Inc.’s
15   (“MPM,”) substantially consummated plan of reorganization under
16   Chapter 11 of the U.S. Bankruptcy Code.1 With one exception, we
17   conclude that the reorganization plan (the “Plan”) confirmed by the
18   bankruptcy court and affirmed by the district court comports with
19   Chapter 11. We remand so that the bankruptcy court can address the
20   single deficiency we identify in the proceedings below, which is the
21   process for determining the proper interest rate under the cramdown
22   provision of Chapter 11.

23                                                I
24         MPM, a leading producer of silicone, faced serious financial
25   problems after it took on significant new debt obligations beginning in




     1
         Momentive Performance Materials, Inc.’s “MPM,” and with affiliated debtors, “Debtors”.

                                                  4
 1   the mid-2000s.2 See 15-1771 JA 286-88; 15-1682 JA 1605-06.3 Following
 2   these debt issuances, MPM was substantially overleveraged, and
 3   ultimately filed a petition under Chapter 11. The four relevant classes
 4   of notes issued by MPM are as follows:
 5          Subordinated Notes. In 2006, MPM issued $500 million in
 6   subordinated unsecured notes (the “Subordinated Notes”) pursuant to
 7   an indenture (the “2006 Indenture”). 15-1771 JA 303. Appellant U.S.
 8   Bank is the indenture trustee for the Subordinated Notes. In 2009 MPM
 9   issued secured second-lien notes and offered the Subordinated Notes
10   holders the option of exchanging their notes for the newly-issued
11   second-lien notes. The second-lien notes were offered at a 60%
12   discount but were secured. 15-1771 JA 2241. Holders of $118 million
13   of the Subordinated Notes accepted the offer, leaving $382 million in
14   unsecured Subordinated Notes outstanding. 15-1771 JA 2241.
15          Second-Lien Notes. In 2010, MPM issued approximately $1 billion
16   in “springing” second-lien notes (the “Second-Lien Notes”). 15-1682
17   JA 1616; 15-1771 JA 476. The Second-Lien Notes were to be unsecured
18   until the $118 million of previously exchanged Subordinated Notes
19   were redeemed, at which point the “spring” in the lien would be
20   triggered. 15-1771 JA 517, 580-81. Once triggered, the Second-Lien
21   Notes would then (but only then) obtain a security interest in the
22   Debtor’s collateral. The exchanged Subordinated Notes were
23   redeemed in November 2012, 15-1771 JA 721, at which point the trigger
24   occurred and the Second-Lien Notes became secured with second-
25   priority liens junior to other pre-existing liens on the Debtors’


     2
        The facts recounted herein derive principally from the bankruptcy court’s decision
     confirming Debtors’ reorganization plan, In re MPM Silicones, LLC, 2014 WL 4436335 (Bankr.
     S.D.N.Y. Sept. 9, 2014), aff’d 531 B.R. 321 (S.D.N.Y. 2015), as well as the public disclosures
     made part of the record. We rely on the facts recounted in the bankruptcy court’s ruling in
     light of our “oblig[ation] to accept the bankruptcy court’s undisturbed findings of fact unless
     they are clearly erroneous.” Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395,
     396 (2d Cir. 1987).

     3
        As discussed, infra note 4, we resolve with this opinion three separate appeals. Our
     citations to the respective records will begin with the relevant docket number on appeal, and
     references to “JA” are to the respective joint appendices filed with that appeal. For example,
     our citation to “15-1771 JA 286-88" is to pages 286-88 of the joint appendix filed in the appeal
     brought by U.S. Bank, docketed No. 15-1771.

                                                    5
 1   collateral. A primary issue on this appeal is whether the Second-Lien
 2   Notes have priority over the Subordinated Notes .
 3          Senior-Lien Notes. In 2012, MPM again issued more debt, this
 4   time in the form of two classes of senior secured notes. Specifically,
 5   MPM issued $1.1 billion in first-lien secured notes (the “First-Lien
 6   Notes”), and $250 million in 1.5-lien secured notes (the “1.5-Lien
 7   Notes,” and, with the First-Lien Notes, the “Senior-Lien Notes”). 15-
 8   1682 JA 1615. Appellants BOKF and Wilmington Trust are the
 9   indenture trustees for the First-Lien Notes and 1.5-Lien Notes,
10   respectively. Pursuant to the governing indentures (the “2012
11   Indentures”), the Senior-Lien Notes were to be repaid in full by their
12   maturity date of October 15, 2020. They carried fixed interest rates of
13   8.875% and 10%, respectively. The 2012 Indentures also called for the
14   recovery of a “make-whole” premium if MPM opted to redeem the
15   notes prior to maturity. Because the Second-Lien Notes and the Senior-
16   Lien Notes are secured by the same collateral, the holders of those
17   notes executed an intercreditor agreement (the “Intercreditor
18   Agreement”), which provided that the Senior-Lien Notes stood in
19   priority to the Second-Lien Notes as to their respective liens, but that
20   each was junior to pre-existing liens on MPM’s collateral. 15-1771 JA
21   691-718. Other primary issues on this appeal are whether the Senior-
22   Lien Note holders are entitled to the make-whole adjustment and the
23   cramdown interest rate they are entitled to if their Notes are replaced
24   under the Plan.

25                                      II
26           After these notes were issued, MPM experienced significant
27   financial problems. See 15-1771 JA 284-88. In April 2014, MPM filed a
28   petition under Chapter 11 and ultimately submitted a reorganization
29   plan to the bankruptcy court. 15-1682 JA 3841-912. Several elements
30   of that Plan are at issue on these appeals. The Plan provided for (i) a
31   100% cash recovery of the principal balance and accrued interest on the
32   Senior-Lien Notes; (ii) an estimated 12.8%-28.1% recovery on the
33   Second-Lien Notes in the form of equity in the reorganized Debtors;
34   but (iii) no recovery on the Subordinated Notes. 15-1771 JA 271-74.
35           The Plan also gave the Senior-Lien Notes holders the option of
36   (i) accepting the Plan and immediately receiving a cash payment of the

                                        6
 1   outstanding principal and interest due on their Notes (without a make-
 2   whole premium), or (ii) rejecting the Plan, receiving replacement notes
 3   “with a present value equal to the Allowed amount of such holder’s
 4   [claim],” and then litigating in the bankruptcy court issues including
 5   whether they were entitled to the make-whole premium and the
 6   interest rate on the replacement notes. 15-1771 JA 271-72; 15-1682 JA
 7   3873-75. The Senior-Lien Notes holders rejected the Plan, and, thus,
 8   elected the latter option.
 9           The appellants here—the Subordinated Notes holders and the
10   Senior-Lien Notes holders—opposed the Plan. (The Second-Lien Notes
11   holders unanimously accepted it.) The Subordinated Notes holders,
12   who were to receive nothing, contended that, under relevant indenture
13   provisions, their Notes were not subordinate to the Second-Lien Notes
14   holders and, consequently, they were entitled to some recovery. The
15   Senior-Lien Notes holders opposed the Plan on the ground that the
16   replacement notes they received did not provide for the make-whole
17   premium, and carried a largely risk-free interest rate that failed to
18   comply with the Code because it was well below ascertainable market
19   rates for similar debt obligations and thus was not fair and equitable
20   because it failed to give them the present value of their claim.
21           Despite these objections, the bankruptcy court confirmed the
22   Plan following a four-day hearing. In re MPM Silicones, LLC, 2014 WL
23   4436335 (Bankr. S.D.N.Y. Sept. 9, 2014), aff’d, 531 B.R. 321 (S.D.N.Y.
24   2015). Confirmation was facilitated by Chapter 11's “cramdown”
25   provision, which allows a bankruptcy court to confirm a reorganization
26   plan notwithstanding non-accepting classes if the plan “does not
27   discriminate unfairly, and is fair and equitable, with respect to each
28   class of claims or interests that is impaired under, and has not accepted,
29   the plan.” 11 U.S.C. § 1129(b)(1).
30           The bankruptcy court concluded that the Plan was fair to the
31   Subordinated Notes holders, despite no recovery, because the 2006
32   Indenture called for their subordination to the Second-Lien Notes. In
33   re MPM Silicones, LLC, 2014 WL 4436335, at *2-*11. It held the plan was
34   fair to the Senior-Lien Notes holders because the 2012 Indentures did
35   not require payment of the make-whole premium in the bankruptcy
36   context and because the interest rate on the proposed replacement


                                         7
 1   notes, even though well below a “market” rate, was determined by a
 2   formula that complied with the Code’s cramdown provision. Id. at *11-
 3   *32.
 4          The bankruptcy court’s confirmation order triggered an
 5   automatic 14-day stay during which Debtors could not consummate the
 6   Plan. See Fed. R. Bankr. P. 3020(e). Appellants aggressively took
 7   advantage of this period and attempted to block the implementation
 8   of the Plan. Specifically, prior to the expiration of the automatic stay,
 9   appellants moved in the bankruptcy court to extend the stay pending
10   their appeal of the confirmation order, which the court denied. See 15-
11   1682 JA 4099, 4173. They then promptly moved the district court for
12   a stay, which was also denied. See 15-1682 JA 183, 185. Appellants then
13   appealed the denial of the stay to this Court, and we dismissed the
14   appeal for lack of jurisdiction. 15-1682 JA 4872-73. Despite these
15   efforts, the Debtors contend this appeal is equitably moot, a contention
16   with which we do not agree.
17          The appellants appealed the confirmation order to the district
18   court which affirmed the bankruptcy court’s confirmation order. 531
19   B.R. 321. The district court essentially agreed with the bankruptcy
20   court, concluding that: (i) the relevant indentures unambiguously
21   prioritize the Second-Lien Notes over the Subordinated Notes, id. at
22   326–31; (ii) the below market interest rate selected by the bankruptcy
23   court complied with the Code, id. at 331–34; and (iii) under their
24   indentures, the Senior-Lien Notes holders are not entitled to the make-
25   whole premium in the context of a bankruptcy, id. at 335–38. The
26   Subordinated Notes holders, the First-Lien Notes holders, and the 1.5-
27   Lien Notes holders separately appealed.4




     4
      The appeals by the First-Lien Notes holders (No. 15-1682) and 1.5-Lien Notes holders (No.
     15-1824) were consolidated and heard in tandem with the appeal by the Subordinated Notes
     holders (No. 15-1771).

                                                 8
 1                                       III
 2         “We exercise plenary review over a district court’s affirmance of
 3   a bankruptcy court’s decisions, reviewing de novo the bankruptcy
 4   court’s conclusions of law, and reviewing its findings of facts for clear
 5   error.” In re Lehman Bros., Inc., 808 F.3d 942, 946 (2d Cir. 2015) (internal
 6   quotation marks omitted).

 7                                       IV
 8         These appeals raise four issues. First, the Subordinated Notes
 9   holders challenge the lower courts’ conclusions that their claims are
10   subordinate to the Second-Lien Notes holders’ claims. Second, the
11   Senior-Lien Notes holders contend that the lower courts erroneously
12   applied a below-market interest rate to their replacement notes. Third,
13   the Senior-Lien Notes holders challenge the lower courts’ rulings that
14   they are not entitled to a make-whole premium. Finally, Debtors argue
15   that we should dismiss these appeals as equitably moot. We find merit
16   only in the Senior-Lien Notes holders’ contention with respect to the
17   method of calculating the appropriate interest rate for the replacement
18   notes. We reject the others.

19                                        A
20         The lower courts concluded that the Plan, which provided no
21   distribution to the Subordinated Notes holders, complied with the
22   governing 2006 Indenture. The Subordinated Notes holders argue this
23   conclusion was erroneous because, under the terms of              the 2006
24   Indenture, their claims are not subordinate to the Second-Lien Notes,
25   whose holders recovered under the plan. The Debtors, on the other
26   hand, contend that the 2006 Indenture gives the Second-Lien Notes
27   priority over the Subordinated Notes. We agree with the Debtors,
28   although for somewhat different reasons from the lower courts which
29   found the relevant indenture provisions unambiguous. We find them
30   to be ambiguous, but resolve the ambiguities in favor of the Debtors.
31

                                          9
 1         The Subordinated Notes holders’ argument begins with Section
 2   10.01 of the 2006 Indenture, which states that the Subordinated Notes
 3   are “subordinated in right of payment . . . to the prior payment in full
 4   of all existing and future Senior Indebtedness of the Company,” and
 5   that “only Indebtedness of the Company that is Senior Indebtedness of
 6   the Company shall rank senior to the Securities in accordance with the
 7   provisions set forth herein.” 15-1771 JA 404. Accordingly, the Second-
 8   Lien Notes stand in priority to the Subordinated Notes only if they
 9   constitute “Senior Indebtedness.”
10         “Senior Indebtedness” in the 2006 Indenture begins with what
11   the parties refer to as the “Baseline Definition,” which defines Senior
12   Indebtedness as:

13          all Indebtedness . . . unless the instrument creating or
14          evidencing the same or pursuant to which the same is
15          outstanding expressly provides that such obligations are
16          subordinated in right of payment to any other
17          Indebtedness of the Company . . .

18   15-1771 JA 341.
19         It is undisputed that the Second-Lien Notes are not subordinated
20   in right of payment to any other indebtedness and that therefore they
21   satisfy the Baseline Definition of Senior Indebtedness. However, the
22   Baseline Definition is then subject to six enumerated exceptions, the
23   fourth of which (the “Fourth Proviso”) excepts from Senior
24   Indebtedness:

25           any Indebtedness or obligation of the Company . . . that
26           by its terms is subordinate or junior in any respect to any
27           other Indebtedness or obligation of the Company . . .
28           including any Pari Passu Indebtedness.

29   15-1771 JA 342 (emphasis added).


                                         10
 1           The Subordinated Notes holders argue that the Fourth Proviso
 2   carves out the Second-Lien Notes from the Baseline Definition, i.e., that
 3   the Second-Lien Notes are an “[i]ndebtedness or obligation of the
 4   Company . . . that by its terms is subordinate or junior in any respect to
 5   any other Indebtedness of the Company.” The Subordinated Notes
 6   holders rely heavily on the “in any respect” language. They argue that
 7   the Second-Lien Notes are subordinate to, for example, the First-Lien
 8   Notes—because, pursuant to the Intercreditor Agreement, the liens
 9   supporting the Second-Lien Notes are junior to the liens supporting the
10   First-Lien Notes—and that they are therefore subordinate to other
11   Indebtedness of the company.
12           The lower courts rejected this argument, and concluded that the
13   Second-Lien Notes unambiguously constitute Senior Indebtedness
14   despite the Fourth Proviso. They did so in reliance on a distinction
15   between “lien subordination” and “payment (or debt) subordination,”
16   concluding that the Fourth Proviso unambiguously carves out from the
17   Baseline Definition only the latter and not the former.5 Because the
18   Second-Lien Notes are not subordinate in payment to other note
19   classes—but         rather,      the     liens     supporting        their     notes      are
20   subordinate—the lower courts concluded that the Second-Lien Notes
21   are not covered by the Fourth Proviso.
22           We do not agree with the lower courts that the Fourth Proviso
23   unambiguously incorporates a distinction between lien subordination
24   and payment subordination. Rather, we conclude that the Fourth
25   Proviso renders the definition of Senior Indebtedness ambiguous as to
26   whether it includes the Second-Lien Notes. Nevertheless, we conclude



     5
      The district court discussed in some detail the distinction between lien subordination and
     payment/debt subordination. 531 B.R. at 328. In short, “[l]ien subordination involves two
     senior creditors with security interests in the same collateral, one of which has lien priority
     over the other. . . . By contrast, in payment subordination, the senior lender enjoys the right
     to be paid first from all assets of the borrower or any applicable guarantor, whether or not
     constituting collateral security for the senior or subordinated lenders.” Id.

                                                   11
 1   that this ambiguity should be resolved in Debtors’ favor given the
 2   plethora of evidence in the record that the parties intended the Second-
 3   Lien Notes to be Senior Indebtedness.

 4                                                1
 5           As discussed, the lower courts concluded that the Second-Lien
 6   Notes are unambiguously Senior Indebtedness. Under New York law,
 7   which governs the Indenture, a fundamental objective of contract
 8   interpretation is to give effect to the expressed intention of the parties.
 9   The initial inquiry is whether the contractual language, without
10   reference to sources outside the text of the contract, is ambiguous.
11   Contract language is ambiguous if it is capable of more than one
12   meaning.
13           We are not persuaded by the Debtors’ (and lower courts’)
14   conclusion that the Fourth Proviso’s reference to “subordinate . . . in
15   any respect” unambiguously refers only to payment subordination and
16   not to lien subordination. The Debtors read the Fourth Proviso as if it
17   states “subordinate . . . in right of payment,” which of course it does not.
18   In so doing, the Debtors disregard the breadth of the term “in any
19   respect,” a term which is generally thought to be as broadly
20   encompassing as possible.6 And, as a practical matter, it seems to us
21   illogical to believe that a second-lien holder does not possess an
22   obligation that is meaningfully subordinate in some respect to a first-
23   lien holder. These sophisticated parties knew how to cabin the type of
24   subordination to which they refer; the indenture uses the term
25   “subordinate . . . in right of payment” many times, including in the
26   Baseline Definition itself.
27           Moreover, the Debtors’ interpretation renders language in the
28   indenture superfluous, which is a common sign of ambiguity. See RJE


     6
       Debtors’ attempt to downplay the significance of the term “in any respect” in this context
     is unconvincing given that the term appears nowhere else in the indenture other than in the
     Fourth Proviso.

                                                 12
 1   Corp. v. Northville Indus. Corp., 329 F.3d 310, 314 (2d Cir. 2003) (in
 2   assessing ambiguity, courts consider the entire contract “to safeguard
 3   against adopting an interpretation that would render any individual
 4   provision superfluous” (internal quotation marks omitted)); see also
 5   Lawyers’ Fund for Client Protection of State of N.Y. v. Bank Leumi Trust Co.
 6   of New York, 94 N.Y.2d 398, 404 (N.Y. 2000) (concluding that an
 7   interpretation that renders a portion of a contract superfluous is
 8   “unsupportable: under standard principles of contract interpretation).
 9   Specifically, if the Fourth Proviso only excepts debt subordinate in right
10   of payment, there is no purpose for the “in right of payment” carve-out
11   in the Baseline Definition. We disagree with the lower courts’ attempts
12   to interpret away this superfluity by finding a distinction between
13   “expressly” (in the Baseline Definition) and “by its terms” (in the
14   Fourth Proviso). We see no meaningful distinction between those
15   terms.
16            Nevertheless, we also conclude that the Subordinated Notes
17   holders’ interpretation, that the Fourth Proviso unambiguously
18   excludes the Second-Line Notes from the definition of Senior
19   Indebtedness, is incorrect. As the lower courts correctly concluded, the
20   Subordinated Notes holders’ interpretation renders key parts of the
21   Baseline Definition superfluous. Under their reading, that definition
22   excludes from Senior Indebtedness only obligations subordinate “in
23   right of payment,” but the Fourth Proviso excludes all obligations that
24   stand behind any type of other obligation.            If so, the Baseline
25   Definition’s more limited carve-out for debt subordinate “in right of
26   payment” would be unnecessary, because all such debt would be
27   carved out from the definition of Senior Indebtedness by the Fourth
28   Proviso.
29            As the Subordinated Notes holders correctly acknowledge, “[f]or
30   this indenture, it simply is not possible to avoid superfluity.” 15-1771
31   Br. of Appellant 54 (internal quotation marks omitted). Where, as here,
32   varying interpretations render contractual language superfluous, we

                                         13
 1   are not obligated to arbitrarily select one as opposed to another.
 2   Because the 2006 Indenture is open to differing reasonable
 3   interpretations as to whether the Second-Lien Notes constitute Senior
 4   Indebtedness, we conclude that it is ambiguous as a matter of law.
 5
 6                                        2
 7         Where a contract term is ambiguous, we look to extrinsic
 8   evidence to determine the intention of the parties. That evidence can
 9   include the parties’ apparent intention, Walk-In Medical Centers, Inc. v.
10   Breuer Capital Corp., 818 F.2d 260, 264 (2d Cir. 1987), what would be
11   commercially reasonable, Fundamental Long Term Care Holdings, LLC v.
12   Cammeby’s Funding LLC, 20 N.Y.3d 438, 445 (2013), and the “parties’
13   interpretation of the contract in practice, prior to litigation,” Ocean
14   Transp., Inc. v. American Philippine Fiber Indus., Inc., 743 F.2d 85, 91 (2d
15   Cir. 1984). Applying these tools, we conclude, as did the district court,
16   that the parties understood that the Second-Lien Notes constituted
17   Senior Indebtedness. See 531 B.R at 331 n.7.
18         First, MPM repeatedly represented to the Securities Exchange
19   Commission and to the financial community that the Second-Lien
20   Notes were Senior Indebtedness. It did so in its prospectuses, 8-Ks and
21   10-Ks. For example, it disclosed in a November 2010 8-K that the
22   Second-Lien Notes are “senior indebtedness of the Company . . . and
23   will rank . . . senior in right of payment to all existing and future
24   subordinated indebtedness.” 15-1771 JA 3057; see also 15-1771 JA 2231.
25   It went further when it subsequently resold certain Subordinated
26   Notes. In a May 2013 prospectus, MPM restated that the Subordinated
27   Notes “are subordinated to all our existing and future senior debt,
28   including the . . . Second-Priority Springing-Lien Notes.” MPM also
29   specifically identified as the first risk related to the Subordinated Notes
30   that those holders’ “right to receive payments on the Notes is junior to
31   those lenders who have a security interest in our assets.” 15-1771 JA
32   3007, 3010. MPM further asserted that in the event it were to file for

                                         14
 1   bankruptcy and were unable to repay its secured debt, “it is possible
 2   that there would be no assets remaining from which your claims could
 3   be satisfied.” 15-1771 JA 3010. The Subordinated Note holders knew
 4   all of this because the Debtors were contractually obligated, pursuant
 5   to Section 4.02 of the 2006 Indenture, to provide copies of its 10-Ks, 10-
 6   Qs, 8-Ks, and all other required disclosures both to the Subordinated
 7   Note holders as well as to their Trustee—a highly sophisticated group
 8   of investors. 15-1771 JA 357. There is no dispute that these disclosures
 9   occurred. Consequently, it was widely understood in the investment
10   community that the Second-Lien Notes had priority.
11         Second, the Subordinated Notes holders’ interpretation generates
12   the irrational outcome that the springing of the Second-Lien Notes’
13   security interest, which was meant to enhance the note holders’
14   protection, would actually strip those notes of their status as Senior
15   Indebtedness and therefore their priority over the Subordinated Notes.
16   As the bankruptcy court concluded, “[t]here is no logical reason for
17   such a distinction, notwithstanding the subordinated noteholders’
18   attempt to find one.” 2014 WL 4436335, at *9.
19         Third, the Subordinated Notes holders’ proposed interpretation
20   that “in any respect” covers all junior liens would mean that no senior
21   note classes would qualify as Senior Indebtedness because each was
22   secured in some respect by a junior lien. For example, the First-Lien
23   Notes were secured in part by a second priority lien on collateral
24   securing a prepetition revolving credit facility. See 15-1771 JA 2425-26.
25   We think it highly improbable that anyone understood this
26   interpretation to be correct. Certainly MPM did not. For example, in a
27   December 2012 prospectus MPM represented to the SEC that the Senior-
28   Lien Notes were Senior Indebtedness. 15-1771 JA 3725. Because those
29   note classes are subordinate to pre-existing liens as to the Debtors’
30   collateral, they, too, would seemingly not qualify as Senior Indebtedness
31   under the Subordinated Notes holders’ interpretation. In light of these
32   factors, we have little trouble concluding that the extrinsic evidence

                                         15
 1   establishes that the most reasonable interpretation of the Indenture is
 2   that the Second-Lien Notes are Senior Indebtedness. The judgment of
 3   the district court on that issue is, therefore, affirmed.

 4                                        B
 5         As a consequence of rejecting the Plan, the Senior-Lien Notes
 6   holders received replacement notes which pay out their claim over time.
 7   The Code permits debtors to make such “deferred cash payments” to
 8   secured creditors (i.e., to “cramdown”). 11 U.S.C. § 1129(b)(2)(A)(i)(II).
 9   However, those payments must ultimately amount to the full value of
10   the secured creditors’ claims. Id. To ensure the creditor receives the full
11   present value of its secured claim, the deferred payments must carry an
12   appropriate rate of interest. See Rake v. Wade, 508 U.S. 464, 472 n.8
13   (1993).
14         The rate selected by the lower courts for the Senior-Lien Note
15   holders’ replacement notes was based on the “formula” rate. The
16   bankruptcy court selected interest rates of 4.1% and 4.85%, respectively,
17   which were largely risk-free rates slightly adjusted for appropriate risk
18   factors. It is not disputed that this rate is below market in comparison
19   with rates associated with comparable debt obligations. The Debtors
20   defend the application of the “formula” method on the ground that it is
21   required by the plurality opinion in the Chapter 13 case of Till v. SCS
22   Credit Corp., 541 U.S. 465 (2004).
23         The Senior-Lien Notes holders contend that because this rate is
24   too low, the Plan is not “fair and equitable” as required by § 1129(b).
25   They argue that the lower courts should have applied a market rate of
26   interest which is the rate MPM would pay to a contemporaneous
27   sophisticated arms-length lender in the open market. The Senior-Lien
28   Notes holders argued in the bankruptcy court that such a market exists
29   and would generate interest in the 5-6+% range. See 15-1682 JA 464,



                                          16
 1   1941.7
 2            The bankruptcy court rejected this approach, and concluded that
 3   a cramdown interest rate should “not take market factors into account.”
 4   2014 WL 4436335, at *25. Viewing itself as “largely governed by the
 5   principles enunciated by the plurality opinion in Till v. SCS Credit Corp.,
 6   541 U.S. 465 (2004),” it concluded that the proper rate was what the
 7   plurality in Till referred to as the “formula” or “prime-plus” rate
 8   (discussed more fully below). Id. at *24, *26. The district court agreed.
 9   531 B.R. at 332–34. The Senior-Lien Notes holders argue on appeal that
10   the lower courts erred in concluding that the Till plurality opinion is
11   wholly applicable to this Chapter 11 proceeding. In substantial part, we
12   agree.
13            At issue in Till was a Chapter 13 debtor’s sub-prime auto loan,
14   carrying an interest rate of 21% and providing the creditor with a $4,000
15   secured claim. As with Chapter 11, Chapter 13 allows debtors to
16   provide secured creditors with future property distributions (such as
17   deferred cash payments) whose total ‘value, as of the effective date of
18   the plan, . . . is not less than the allowed amount of such claim.” 11
19   U.S.C. § 1325(a)(5)(B)(ii). The question became, as here, how to calculate
20   the interest on the deferred payments such that the creditor would
21   receive the full value of its claim. No single interest-calculation method
22   secured a majority vote on the Court, resulting in a plurality opinion
23   endorsing the “formula” method.
24            The “formula” approach endorsed by the Till plurality instructs
25   the bankruptcy court to begin with a largely risk-free interest rate,


     7
        Debtors’ reorganization plan proposed interest rates of 3.6% and 4.09%. See 2014 WL
     4436335, at *24. However, the bankruptcy court concluded that those rates should be
     increased by 0.5% and 0.75%, respectively, in light of the fact that the base interest rate was
     pegged to the Treasury rate, rather than the prime rate (which reflects additional risk). Id.
     at *32. On appeal to the district court, the Senior-Lien Notes holders argued the bankruptcy
     court erred in not requiring the prime rate, an argument the district court rejected. 531 B.R.
     at 334-35. The Senior-Lien Notes holders do not press this argument here.

                                                   17
 1   specifically, the “national prime rate . . . which reflects the financial
 2   market’s estimate of the amount a commercial bank should charge a
 3   creditworthy commercial borrower to compensate for the opportunity
 4   costs of the loan, the risk of inflation, and the relatively slight risk of
 5   default.” 541 U.S. at 479. The bankruptcy court should then hold a
 6   hearing to determine a proper plan-specific risk adjustment to that
 7   prime rate “at which the debtor and any creditors may present
 8   evidence.” Id. Using this approach, “courts have generally approved
 9   adjustments [above the prime rate] of 1% to 3%.” Id. at 480.8
10           The Till plurality arrived at the “formula” rate after rejecting a
11   number of alternative methods relied on by the lower courts.
12   Significantly, it rejected methods relying on purported “market” rates
13   of interest because those rates “must be high enough to cover factors,
14   like lenders’ transactions costs and overall profits, that are no longer
15   relevant in the context of court-administered and court-supervised
16   cramdown loans.” 541 U.S. at 477. The plurality then identified the
17   only factors it viewed as relevant in properly ensuring that the sum of
18   deferred payments equals present value: (i) the time-value of money; (ii)
19   inflation; and (iii) the risk of non-payment. Id. at 474. The plurality
20   concluded that the “formula” or “prime-plus” method best reflects
21   those considerations.
22           Although Till involved a Chapter 13 petition, the plurality
23   intimated that the “formula” method might be applicable to rate
24   calculations made pursuant to other similarly worded Code provisions.
25   In fact, it cited the Chapter 11 cramdown provision, 11 U.S.C. §
26   1129(b)(2)(A)(i)(II), among many other provisions, when it noted that


     8
       Here, the bankruptcy court applied risk adjustments of 2.0% and 2.75%, which it added
     to the Treasury rate of 2.1% to arrive at interest rates of 4.1% and 4.85%, respectively. 2014
     WL 4436335, at *32. Debtors assert in their briefing that the Treasury rate dropped by
     approximately 0.2% between the confirmation date and the plan’s effective date, which
     thereby further lowered their notes’ interest rate. 15-1682 Br. of Appellee at 11 n.3.

                                                   18
 1   “[w]e think it likely that Congress intended bankruptcy judges and
 2   trustees to follow essentially the same approach when choosing an
 3   appropriate interest rate under any of these [Code] provisions.” Id. at
 4   474 & n.10.
 5          Despite that language, however, the plurality made no conclusive
 6   statement as to whether the “formula” rate was generally required in
 7   Chapter 11 cases. And, notably, the plurality went on to state, in the
 8   opinion’s much-discussed footnote 14, that the approach it felt best
 9   applied in the Chapter 13 context may not be suited to Chapter 11.
10   Specifically, in that footnote , the Court stated that in Chapter 13
11   cramdowns “there is no free market of willing cramdown lenders.” 541
12   U.S. at 476 n.14. It continued: “[i]nterestingly, the same is not true in the
13   Chapter 11 context, as numerous lenders advertise financing for
14   Chapter 11 debtors in possession. Thus, when picking a cramdown rate
15   in a Chapter 11 case, it might make sense to ask what rate an efficient
16   market would produce.” Id. (internal citations omitted) (emphasis in
17   original).9
18          Many courts have relied on footnote 14 to conclude that efficient
19   market rates for cramdown loans cannot be ignored in Chapter 11 cases.
20   Most notably, the Sixth Circuit, “tak[ing] [its] cue from Footnote 14” of
21   the Till plurality, adopted a two-part process for selecting an interest
22   rate in Chapter 11 cramdowns:

23          [T]he market rate should be applied in Chapter 11 cases
24          where there exists an efficient market. But where no
25          efficient market exists for a Chapter 11 debtor, then the
26          bankruptcy court should employ the formula approach
27          endorsed by the Till plurality.


     9
      The Supreme Court has not subsequently spoken about the interest-calculation method to
     be applied in a Chapter 11 case. Nor have we.



                                               19
 1   In re American HomePatient, Inc., 420 F.3d 559, 568 (6th Cir. 2005). In
 2   applying this rule, courts have held that markets for financing are
 3   ‘efficient’ where, for example, “they offer a loan with a term, size, and
 4   collateral comparable to the forced loan contemplated under the
 5   cramdown plan.” In re Texas Grand Prairie Hotel Realty, L.L.C., 710 F.3d
 6   324, 337 (5th Cir. 2013).10
 7           We adopt the Sixth Circuit’s two-step approach, which, in our
 8   view, best aligns with the Code and relevant precedent. We do not read
 9   the Till plurality as stating that efficient market rates are irrelevant in
10   determining value in the Chapter 11 cramdown context.                                     And,
11   disregarding available efficient market rates would be a major departure
12   from long-standing precedent dictating that “the best way to determine
13   value is exposure to a market.” Bank of Am. Nat’l Trust and Sav. Ass’n v.
14   203 N. LaSalle St. P’ship, 526 U.S. 434, 457 (1999) (assessing a Chapter 11
15   cramdown); see also United States v. 50 Acres of Land, 469 U.S. 24, 25 & n.1
16   (1984) (“fair market value” is “what a willing buyer would pay in cash
17   to a willing seller” (internal quotation marks omitted)). In Bank of
18   America, the Court noted that “one of the Code’s innovations [was] to
19   narrow the occasions for courts to make valuation judgments,” and
20   expressed a “disfavor for decisions untested by competitive choice . . .
21   when some form of market valuation may be available.” Bank of America,
22   526 U.S. at 457-58.
23           The Senior-Lien Notes holders presented expert testimony in the
24   bankruptcy court that, if credited, would have established a market rate.
25   This evidence showed that if the Senior-Lien Noteholders were to have
26   approved the Plan and accepted a cash-out payment for their notes,
27   MPM would have had to secure exit financing to cover the lump-sum
28   payment. In preparation for that possible eventuality (which did not

     10
        Numerous courts, included in this Circuit, have followed the American HomePatient
     approach. See, e.g., In re 20 Bayard Views, LLC, 445 B.R. 83, 108-09 (E.D.N.Y. 2011) (collecting
     cases and deciding to “follow the majority approach” first outlined in American HomePatient).

                                                    20
 1   come to pass in light of the Senior-Lien Notes holders’ rejection of the
 2   Plan), MPM went out into the market seeking lenders to provide that
 3   financing. Those lenders quoted MPM rates of interest ranging between
 4   5 and 6+%. See In re MPM Silicones, LLC, 2014 WL 4436335, at *29.
 5           At these rates, the First-Lien Note holders contend that they
 6   would have received around $150 million more than the Plan offered,
 7   Br. of First-Lien Appellant 25, 33. The 1.5-Lien Note holders claim that
 8   the interest rate chosen by the lower courts led them to receive notes
 9   “valued by the market at less than 93 cents on the value of the secured
10   claims,” Br. of 1.5-Lien Appellant 20.11 The Plan was objectionable to the
11   Senior-Lien Notes holders because, in essence, it required them to lend
12   Debtors a significant sum of money and receive a much lower rate of
13   interest than any other lender would have received for offering the same
14   loan to MPM on the open market.
15           When dealing with a sub-prime loan in the Chapter 13 context,
16   “value” can be elusive because the market is not necessarily efficient
17   and the borrower is typically unsophisticated. However, where, as
18   here, an efficient market may exist that generates an interest rate that is
19   apparently acceptable to sophisticated parties dealing at arms-length,
20   we conclude, consistent with footnote 14, that such a rate is preferable
21   to a formula improvised by a court. See Bank of America, 526 U.S. at 457;
22   see also In re Valenti, 105 F.3d at 63 (the goal of the cramdown rate “is to
23   put the creditor in the same economic position that it would have been
24   in had it received the value of its allowed claim immediately”); see also
25   15-1682 JA 3428 (First-Lien Notes holders’ expert testifying that because
26   the First-Lien Notes holders “are pricing it at the market . . . they’re
27   being compensated for the underlying risk that they are taking,” and
28   not for any “imbedded profit”).

     11
        The Senior-Lien Notes holders offered evidence that the market price for their notes
     dropped, respectively, from 101.375% and 104.000% six days prior to the bankruptcy court’s
     oral decision, to 94.375% and 92.563% nine days after that decision. 15-1682 JA 3991 ¶¶ 5-6,
     8-9.

                                                  21
 1           We understand that the complexity of the task of determining an
 2   appropriate market rate will vary from case to case. In some cases the
 3   task will be straightforward, in others it will be more complex. But, at
 4   the end of the day, we have no reason to believe the task varies
 5   materially in difficulty from the myriad tasks which we regularly rely
 6   on the expertise of our bankruptcy courts to resolve.
 7           We therefore conclude that the lower courts erred in categorically
 8   dismissing the probative value of market rates of interest. We remand
 9   so that the bankruptcy court can ascertain if an efficient market rate
10   exists and, if so, apply that rate, instead of the formula rate.12 We arrive
11   at no conclusion with regard to the outcome of this inquiry.

12                                                 C
13           The 2012 Indentures governing the Senior-Lien Notes contain
14   Optional Redemption Clauses, which provide for the payment of a
15   make-whole premium13 (referred to as the “Applicable Premium” in the
16   indentures) if MPM were to “redeem the Notes at its option” prior to
17   October 15, 2015. 15-1682 JA 2322.14 The make-whole premium was


     12
        We acknowledge that the lower courts grappled with the Senior-Lien Notes holders’
     evidence regarding MPM’s quoted exit financing, and made express their view that the rate
     produced by that process may not in fact have been produced by an efficient market. 2014
     WL 4436335, at *26, *29; 531 B.R. at 334 n.9. Nevertheless, Judge Drain left no ambiguity that
     he applied the “formula” approach for Chapter 13 individual bankruptcy cases as dictated
     by the Till plurality and, in so doing, explicitly declined to consider market forces. See 2014
     WL 4436335, at *25-*26; see also id. at * 28 (“I conclude that [the American HomePatient] two-
     step method, generally speaking, misinterprets Till”). Judge Briccetti agreed with this
     approach. 531 B.R. at 334. As discussed, this was in error. The bankruptcy court should
     have the opportunity to engage the American HomePatient analysis in earnest.

     13
        A make-whole premium is a “contractual substitute for interest lost on Notes redeemed
     before their expected due date.” In re Energy Future Holdings Corp., 842 F.3d 247, 251 (3d Cir.
     2016) (“EFH”). As stated by the bankruptcy court, its purpose “is to ensure that the lender
     is compensated for being paid earlier than the original maturity of the loan for the interest
     it will not receive . . . .” 2014 WL 4436335, at *15.

     14
       We cite in this section to the indenture for the First-Lien Notes; the indenture for the 1.5-
     Lien Notes is identical for relevant purposes.

                                                   22
 1   intended to ensure that the Senior-Lien Notes holders received
 2   additional compensation to make up for the interest they would not
 3   receive if the Notes were redeemed prior to their maturity date.
 4         In October 2014, the Debtors, pursuant to the Plan, issued
 5   replacement notes to the Senior-Lien Notes holders, which did not
 6   account for the make-whole premium. These holders contended that
 7   the failure to include that premium violated the 2012 Indentures. The
 8   bankruptcy court concluded that the Senior-Lien Notes holders were
 9   not entitled to the premium. It reasoned that under the 2012 Indentures
10   the make-whole premium would be due only in the case of an “optional
11   redemption” and not in the case of an acceleration brought about by a
12   bankruptcy filing. 2014 WL 4436335, at *11-*15. The district court
13   agreed. 531 B.R. at 335-38. We too agree.
14         The Senior-Lien Notes holders claim entitlement to the make-
15   whole premium for essentially three reasons: (i) they are entitled to the
16   make-whole under the 2012 Indentures’ Optional Redemption Clauses;
17   (ii) they are entitled to it under the 2012 Indentures’ Acceleration
18   Clauses; and (iii) even if the indentures did not allow for a make-whole
19   premium upon acceleration, they should not have been permanently
20   barred from exercising their contractual right to rescind acceleration and
21   thereby obtain the make-whole premium.

22                                       1
23         The Senior-Lien Notes holders’ principal argument is that they
24   are entitled to the make-whole premium because when MPM issued the
25   replacement notes under the Plan, it “redeemed” the Notes “at its
26   option” prior to maturity. This argument fails for the same reasons we
27   rejected nearly identical arguments in In re AMR Corp., 730 F.3d 88 (2d
28   Cir. 2013). There we rejected the note holders’ argument that they were
29   entitled to a make-whole premium following a debtor’s bankruptcy
30   filing. We concluded that:



                                        23
 1          American’s bankruptcy petition triggered a default, and
 2          this default automatically accelerated the debt.          That
 3          acceleration changed the date of maturity from some point
 4          in the future . . . to an earlier date based on the debtor’s
 5          default under the contract. . . . When the event of default
 6          occurred and the debt accelerated, the new maturity for
 7          the debt was November 29, 2011 [the date of the
 8          bankruptcy petition]. Consequently, American’s attempt
 9          to repay the debt in October 2012 was not a voluntary
10          prepayment because [p]repayment can only occur prior to
11          the maturity date.

12   Id. at 103 (internal citations and quotation marks omitted).
13         The Senior-Lien Notes holders argue AMR is inapplicable because
14   it spoke only to “prepayment” rather than “redemption.” As the district
15   court noted, the principle of AMR does not turn on the distinction
16   between “prepayment” and “redemption.” 531 B.R. at 336-37. In fact,
17   in AMR we stated that because “American’s debt was accelerated . . .
18   upon its bankruptcy filing [it] is not now voluntarily redeeming the
19   notes.” AMR, 730 F.3d at 109.
20         We also held in AMR that acceleration brought about by a
21   bankruptcy filing changes the date of maturity of the accelerated notes
22   to the date of the petition. 730 F.3d at 103. Therefore, any payment on
23   the accelerated notes following a bankruptcy filing would be a post-
24   maturity payment. And, as the First-Lien Notes holders concede, the
25   “plain meaning of the term ‘redeem’ is to ‘repay[] . . . a debt security .
26   . . at or before maturity.’” 15-1682 Br. of First-Lien Appellant 39 (emphasis
27   added). Here, Debtors’ payment was post-maturity, not “at or before”
28   maturity. But see In re Energy Future Holdings Corp., 842 F.3d 247, 255 (3d
29   Cir. 2016).    Moreover, even assuming MPM’s issuance of the
30   replacement notes was a “redemption,” it would not have been “at
31   [MPM’s] option,” as required to trigger the Optional Redemption

                                          24
 1   Clauses. Rather, the obligation to issue the replacement notes came
 2   about automatically by operation of separate indenture provisions, the
 3   Automatic Acceleration Clauses. A payment made mandatory by
 4   operation of an automatic acceleration clause is not one made at MPM’s
 5   option. See AMR, 730 F.3d at 100–01.

 6                                                 2
 7           As discussed, the 2012 Indentures each contain an Acceleration
 8   Clause, which calls for the acceleration of payment of the Senior-Lien
 9   Notes under certain conditions constituting an Event of Default.
10   Pursuant to Section 6.01(g), one such event is MPM’s filing of a
11   voluntary bankruptcy petition. Although most Events of Default allow
12   the Senior-Lien Notes holders the option of accelerating payment, a
13   default brought about by MPM’s voluntary bankruptcy petition leads
14   to an automatic acceleration under Section 6.02.15
15           The Senior-Lien Notes holders argue that the term “premium, if
16   any” in the Acceleration Clauses requires that the make-whole premium
17   is due upon an automatic acceleration. This argument fails in light of
18   our conclusion that the Senior-Lien Notes holders are not entitled to the
19   make-whole premium under the Optional Redemption Clauses. In
20   other words, the make-whole premium is not due pursuant to the
21   Acceleration Clauses’ reference to “premium, if any,” for the simple
22   reason that the more specific Optional Redemption Clauses which grant
23   the make-whole are not triggered and thus no premium has been
24   generated. See Aramony v. United Way of Am., 254 F.3d 403, 413 (2d Cir.
25   2001) (noting that “it is a fundamental rule of contract construction that
26   specific terms and exact terms are given greater weight than general
27   language” (internal quotation marks omitted)).


     15
        Section 6.02 provides: “If an Event of Default specified in Section 6.01(f) or (g) with
     respect to MPM occurs, the principal of, premium, if any, and interest on all the Notes shall
     ipso facto become and be immediately due and payable without any declaration or other act
     on the part of the Trustee or any Holders.” 15-1682 JA 2260.

                                                  25
 1                                               3
 2           Finally, the Senior-Lien Notes holders argue that the lower courts
 3   erred in disregarding their contractual right to rescind acceleration,16 a
 4   right that if invoked would have reinstated the original maturity date
 5   and thereby kept the Optional Redemption Clauses (and therefore the
 6   make-whole premium) in effect.
 7           AMR forecloses this argument as well. There, considering nearly
 8   identical indenture language, we concluded that a creditor’s post-
 9   petition invocation of a contractual right to rescind an acceleration
10   triggered automatically by a bankruptcy filing is barred because it
11   would be “an attempt to modify contract rights and would therefore be
12   subject to the automatic stay.” 730 F.3d at 102; see also id. at 102-03 (“any
13   attempt by U.S. Bank to rescind acceleration now—after the automatic
14   stay has taken effect—is an effort to affect American’s contract rights,
15   and thus the property of the estate”).
16           The Senior-Lien Notes holders again attempt to distinguish AMR
17   by relying on the fact that the acceleration provision there, unlike the
18   one here, expressly disavowed the make-whole premium. According
19   to the 1.5-Lien Notes holders, our concern in AMR was therefore with
20   not allowing the creditors “an end-run around their bargain by
21   rescission.” 15-1682 Br. of 1.5-Lien Appellant 45. This argument fails
22   because, although the provisions at issue here do not expressly disallow
23   the make-whole premium, the Optional Redemption Clauses, as we
24   have seen, achieve this result. Therefore, just as in AMR, because the
25   right to rescind acceleration here would serve as “an end-run around
26   their bargain by rescission,” the lower courts correctly concluded that
27   the automatic stay barred rescission of the acceleration of the Notes.



     16
       “Holders of a majority in principal amount of outstanding Notes by notice to the Trustee
     may rescind any such acceleration with respect to the Notes and its consequences.” 15-1682
     JA 2260.

                                                 26
 1                                                V
 2           Debtors seek dismissal of these appeals under the principle of
 3   equitable mootness, a “prudential doctrine that is invoked to avoid
 4   disturbing a reorganization plan once implemented.” In re Metromedia
 5   Fiber Network, Inc., 416 F.3d 136, 144 (2d Cir. 2005).17 The doctrine
 6   “allows appellate courts to dismiss bankruptcy appeals ‘when, during
 7   the pendency of an appeal, events occur’ such that ‘even though
 8   effective relief could conceivably be fashioned, implementation of that
 9   relief would be inequitable.’” In re Motors Liquidation Co., 829 F.3d 135,
10   167 (2d Cir. 2016) (quoting In re Chateaugay Corp., 988 F.2d 322, 325 (2d
11   Cir. 1993) (“Chateaugay II”)). The doctrine requires us to “carefully
12   balance the importance of finality in bankruptcy proceedings against the
13   appellant’s right to review and relief.” In re Charter Commc’ns. Inc., 691
14   F.3d 476, 481 (2d Cir. 2012). With these principles in mind, we decline
15   to dismiss any of these appeals as equitably moot.
16           Where, as here, a reorganization plan has been substantially
17   consummated, we presume that an appeal of that plan is equitably
18   moot. In re BGI, Inc., 772 F.3d 102, 104 (2d Cir. 2014). That presumption,
19   however, gives way where five factors first identified in Chateaugay II
20   are met. They are, where: (i) effective relief can be ordered; (ii) relief
21   will not affect the debtor’s re-emergence; (iii) relief “will not unravel
22   intricate transactions”; (iv) affected third-parties are notified and able
23   to participate in the appeal; and (v) appellant diligently sought a stay of
24   the reorganization plan. In re Charter, 691 F.3d at 482.



     17
         Debtors filed with the district court a motion to dismiss the appeal of the bankruptcy
     court’s confirmation order on the basis of equitable mootness. 15-1771 JA 4570-88. The
     district court made no ruling on the motion, concluding it was “mooted by this Court’s
     decision to affirm the Orders of the Bankruptcy Court.” 531 B.R. at 338 n.14. Debtors then
     filed motions to dismiss on equitable mootness grounds with this Court, 15-1682 Doc. 58; 15-
     1771 Doc. 62 , which we summarily denied without prejudice to Debtors “rais[ing] the issue
     . . . in their merits brief,” 15-1682 Doc. 159; 15-1771 Doc. 102.

                                                  27
 1          Although we require satisfaction of each Chateaugay II factor to
 2   overcome a mootness presumption, we have placed significant reliance
 3   on the fifth factor, concluding that a “chief consideration under
 4   Chateaugay II is whether the appellant sought a stay of confirmation.”
 5   In re Metromedia, 416 F.3d at 144. Along these lines, we concluded that
 6   “[i]f a stay was sought, we will provide relief if it is at all feasible, that
 7   is, unless relief would ‘knock the props out from under the
 8   authorization for every transaction that has taken place and create an
 9   unmanageable, uncontrollable situation for the Bankruptcy Court.’” Id.
10   (quoting Chateaugay II, 10 F.3d at 953).
11          A special emphasis on this factor is sound. Equitable mootness
12   issues only arise in earnest following a judicial determination that some
13   facet of a reorganization plan violates the Code.            It is generally
14   considered inappropriately harsh to deny relief to which one is entitled
15   on the purportedly equitable ground that the unfair (or illegal) plan has
16   been put into effect, especially where a creditor took all appropriate
17   steps to secure judicial relief. In such a case, we have held that it is
18   proper to “provide relief if it is at all feasible.” Id.
19          Here, the appellants immediately objected to various provisions
20   of the Plan and promptly and consistently sought a stay in three
21   different courts. Thus their diligence is not in question. Debtors
22   nevertheless argue that these appeals should be dismissed as moot
23   because of the cascading effects of rewriting the plan were the
24   appellants to prevail.      Specifically, they argue that “granting the
25   Noteholders’ relief would alter a critical piece of the Plan resulting from
26   the intense-multi-party negotiation, thereby impact[ing] other terms of
27   the agreement and throw[ing] into doubt the viability of the Plan,” and
28   that according such relief “would cause debilitating financial
29   uncertainty” to the emergent Debtor. 15-1682 Br. of Appellees 69, 71
30   (internal quotation marks omitted).
31          In light of the limited nature of the remand we order, we do not
32   believe these concerns will materialize. On remand, the bankruptcy

                                           28
 1   court will only be called on to re-evaluate the interest to be received on
 2   the replacement notes held by the Senior-Lien Notes holders. The
 3   Debtors acknowledge that this might require, at most, $32 million of
 4   additional annual payments over seven years. 15-1682 Br. of Appellees
 5   69. The Debtors will not have to pay out the nearly $200 million they
 6   assert would be required to pay the Senior-Lien Notes holders’ make-
 7   whole premium, nor will any redistribution be required to the
 8   Subordinated Notes holders, as to which the plan is fair. In fact, our
 9   judgment allows for no redistribution other than that from the Debtors
10   to the Senior-Lien Notes holders.
11         Given the scale of Debtors’ reorganization, we are not persuaded
12   that a payment of, perhaps, $32 million in annual payments over seven
13   years, with no other redistribution from other creditors or third parties,
14   would unravel the plan, threaten Debtors’ emergence, or otherwise
15   materially implicate the concerns identified in Chateaugay II.
16         Our conclusion is supported by the findings of the lower courts,
17   which had intimate familiarity with the Debtors’ financial condition and
18   the transactions that will arise from the reorganization. Although it
19   made no determinative ruling as to equitable mootness, the bankruptcy
20   court opined that “the risk of equitable mootness is not strong here for
21   either set of movants . . . the senior secured lender set of movants and the
22   senior subordinated noteholder movants.” 15-1682 JA 4165 (emphasis
23   added). The district court agreed. 15-1682 JA 4837 (“I agree with Judge
24   Drain that the risk of equitable mootness here is not very great . . .”).
25   Debtors’ request that we dismiss these appeals as equitably moot is
26   denied.

27

28

29


                                         29
 1                                     VI

 2         To summarize, we conclude as follows:
 3
 4      1. The Second-Lien Notes stand in priority to the Subordinated
 5          Notes.
 6      2. The Senior-Lien Notes holders are not entitled to the make-
 7          whole premium.
 8      3. The lower court erred in the process it used to calculate the
 9          interest rate applicable to the replacement notes received by
10          the Senior-Lien Notes holders. On remand, the bankruptcy
11          court should assess whether an efficient market rate can be
12          ascertained, and, if so, apply it to the replacement notes.
13      4. We decline to dismiss any of these appeals as equitably
14          moot.
15
16   For the foregoing reasons, we AFFIRM the District Court’s order in
17   part, with respect to the priority of the Subordinated Notes and the
18   Senior-Lien Notes holders’ entitlement to a make-whole premium;
19   REVERSE the order in part, with respect to the method of calculating
20   the interest rate on the Senior-Lien Notes holders’ replacement notes;
21   and REMAND the matter for further proceedings consistent with this
22   opinion.
23




                                        30
