In re Assyrian Babylon, LLC – feasibility of Chapter 11 plan

     In In re Assyrian Babylon, LLC, 2012 Bankr. LEXIS 5589 (Bankr. D. Ariz. 2012), decided by Judge Marlar on December 3, 2012, the court held that a chapter 11 plan of reorganization was feasible despite the fact that the debtor business had to essentially start over at a new location. 

     The debtor operated a sports bar in Yuma, Arizona.  A fire had occurred prior to the bankruptcy that left a portion of the premises uninhabitable.  During the bankruptcy proceeding, a remodeling dispute arose between the debtor and its landlord and major creditor which ultimately lead to the court ordering the debtor to vacate the premises in June 2012.  Just a few weeks later, on August 2, 2012, the debtor filed a plan of reorganization to which the creditor objected based on feasibility grounds.

     The court noted the six factors to be considered when evaluating the feasibility of a plan:  (1) the adequacy of the capital structure; (2) the earning power of the business; (3) economic conditions; (4) the ability of management; (5) the probability of the continuation of the same management; and (6) any other related matters which determine the prospects of a sufficiently successful operation to enable performance of the provisions of the plan.  The court also noted that there was no operating history at the new location to which the debtor intended to relocate and that the amount of new capital being infused into the venture was “thin.”  However, the court found that the debtor had met its burden of proof on feasibility.  The court stated that, “we are dealing with a fairly small business that has successfully operated in the past” and, “[a]lthough legitimate differences of opinion exist over the thin amount of new capital being infused, and recognizing that, while more may be better, less is not fatal to feasibility.”