Can You Get Your New Mortgage Loan for Less (the mortgage interest rate) and
Without those Worrisome Contract Covenants? Or, How Cramdown Can Change Your life
By David R. Kuney∗ I. Introduction: Setting the Interest Rate.
A. In order to confirm a plan of reorganization over the objection of a secured lender requires that a debtor comply with the “cramdown” provisions of 11 U.S.C. § 1129(b)(2)(A). This section requires that the claim of the secured lender be provided with a claim treatment which satisfies the requirement of being “fair and equitable.”
B. The definition of “fair and equitable” includes the following: that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder’s interest in the estate’s interest in such property. C. Because the cram down provisions permit a debtor to make a series of
“deferred payments” over time, there is a requirement that the stream of payments have a value (e.g., “present value”) “of at least the value” of the lender’s collateral (e.g., “interest in the estate’s interest in such property”). D. In short, this statutory requirement means that the lender’s claim must be
paid “interest” as the compensation for the deferred cash payments.
E. The determination of the correct interest rate is "arguably the most debated economic issue in bankruptcy litigation." Monica Hartman, Selecting the
Correct Cramdown Interest Rate in Chapter 11 and Chapter 13 Bankruptcies, 47 UCLA L.Rev. 521, 522 (1999). One scholar has
remarked that "there are reported bankruptcy court opinions to support almost any conceivable cram down interest rate." David G. Epstein,
Don't Go and Do Something Rash About Cram Down Interest Rates,
49 Ala. L.Rev. 435, 443 (1998).
∗ David R. Kuney is a partner in the Bankruptcy and Reorganization Group in Sidley Austin Brown &
Wood, LLP, in Washington, D.C. and an Adjunct Professor of Bankruptcy law at Georgetown University Law Center.
F. The Supreme Court was asked to resolve the Circuit conflict, but
apparently declined to do so. case Green Tree Financial Servicing Corp.
v. Smithwick, (In re Smithwick), 121 F.3d 211 (5th Cir.1997) cert. denied
523 U.S. 1074, 118 S.Ct. 1516, 140 L.Ed.2d 669 (1998)
G. The court's have adopted various theories on how the interest rate should be set; an excellent summary of the conflicting theories is found in Judge Wedoff’s decision in In re Scott, 248 B.R. 786 (Bankr. N.D. Ill. 2000) and in Judge Osteen's decision in Ivey v. Fleet Finance, 147 B.R. 109 (M.D. N.C. 1992)
H. The core concept which underlies all of the various theories is “premised on the principle that the cramdown interest rate should provide secured creditors with the economic equivalent of repossessing their collateral— after all, surrender of the collateral is an alternative way of satisfying secured claims.” In re Scott, 248 B.R. 786 (Bankr. N.D. Ill. 2000). I. Most of the decisions fall into one of three approaches: the cost of funds
approach; the coerced loan approach, and the “risk plus” formula; although some cases use the labels in a confusing and interchangeable fashion.
II. Observations about the Interest Rate Issue As Applied to Commercial Real Estate Loans.
A. The selection of the cram down interest rate is one of the most important issues to both lender and owner in the real estate bankruptcy case.
B. In an era of potentially declining rental rates for commercial real property, the interest rate is what ultimately determines whether the owner will be able to generate sufficient cash flow to service the first mortgage. C. Because bankruptcy permits a court to reset the interest rate on the
mortgage loan to the “prevailing market” in some cases, the determination of the correct interest rate is one of the most vital issues in the real estate bankruptcy case.
D. The interest rate issue in the 2000’s will be markedly different from the issue as it developed in the early 1990’s.
E. One significant change from the 1990’s is that the law has evolved into a more stable body of case law, with most cases now recognizing that the interest rate issue should not be used as an aggressive litigation tactic to prevent reorganization. “To deny confirmation because there is no actual market for a similar loan would in effect be giving the market permission to repeal §1129(b)(2). . .Therefore the Court’s inquiry must focus on a hypothetical market rate of interest for a loan of similar terms.” In re
F. A second change is the result of real estate projects today being more likely to be over secured, rather than over-leveraged, as occurred in the 1990’s. Because courts typically look to “prevailing market rates” for guidance on this issue, real estate cases arising in the 1990’s had presented the problem of identifying whether there was any comparable market for loans which were essentially being restructured in the bankruptcy process as 100% loan to value mortgages, which is typically the result in a cram down.
G. However, in the market place of the 2002, it may be that most real estate projects are de- leveraged, and that bankruptcy courts will be confronting an interest rate determination that does not involve the use of special formulas, such as the hybrid or band of investment method, to determine the appropriate interest rate.1
H. And lastly, the interest rate market has been declining during the past several years. Thus, debtors may have the opportunity to seek a loan modification in terms of interest rate change (although no cramdown on the principal amount of the loan).
I. There are now significant differences between the Second, Third and Fourth Circuits, thus making place of filing a potentially significant issue. The Third and Fourth Circuits follow the coerced loan method, whereas the Second Circuit utilizes the formula method, which looks to a risk free rate (such as the treasury rate) and then applies a risk factor. It is unclear which jurisdictions may impose a lower rate, but it is arguable that New York and Second Circuit cases may yield a lower rate in declining interest markets, such as have occurred during 2001 and 2002.
III. Coerced Loan: Comparable Loan or Prevailing Market Rates.
A. Eight Circuit Courts have adopted or approved (but may not necessarily require) a methodology of determining the interest rate which looks primarily to the prevailing market conditions for new loans, which that lender might otherwise make in its geographic region. Some courts impose a rebuttable presumption in favor of the existing contract rate. 1. The Court’s use various terminology to describe this method,
although it is most frequently referred to as the “coerced loan” or “prevailing market” theory or “comparable loan” theory. 2. Under this method, the court is supposed to focus on the interest
rate which the particular lender could achieve in its market if it were to re- lend the funds in its market area.
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3. This theory has had long recognition in Collier’s: It is submitted that deferred payment of an obligation under a plan is a coerced loan and the rate of return with respect to such loan must correspond to the rate which would be charged or obtained by the creditor making a loan to a third party with similar terms, duration, collateral, and risk. It is therefore submitted that the appropriate discount rate must be determined by reference to the market interest rate.” 5 Collier on Bankruptcy, ¶1129.03 at 1129-104 to 105.
B. Third Circuit. The Third Circuit has approved the use of the coerced
loan method. A leading case explaining the basic theory of the coerced loan model is General Motors Acceptance Corp. v. Jones, 999 F.2d 63 (3rd Cir. 1993).
1. The appropriate cram down interest rate “is that which the secured creditor would charge, at the effective date of the plan, for a loan similar in character, amount and duration to the credit which the creditor will be required to extend under the plan.” Id. at 65. 2. The court adopted the “coerced loan” model on the grounds that
“[i]n effect the law requires the creditor to make a new loan in the amount of the value of the collateral rather than repossess it, and the creditor is entitled to interest on his loan.”
3. The court further decided that if the creditor received the rate it charged in “the regular course of its business in the region for loans of similar character, amount and duration, that creditor will be placed in approximately the same position it would have occupied had it been able to simply to repossess the collateral at the time of the bankruptcy.” Id. at 68.
4. The Court further adopted a rule which creates a presumption in
favor of the contract rate:
In the absence of a stipulation regarding the creditor’s current rate for a loan of similar
character, amount and duration, we believe it would be appropriate for bankruptcy courts to accept a plan utilizing the contract rate if the creditor fails to come forward with persuasive evidence that its current rate is in excess of the contract rate. Conversely, utilizing the same rebuttable
with a rate less than the contract rate, it would be appropriate, in the absence of stipulation, for a bankruptcy court to require the debtor to come forward with some evidence that the creditor’s current rate is less than the contract rate.
Id. at 70-71.
5. In GMAC the court said that it should look at the specific lenders' actual pricing method, but without regard to any risk adjustments. (a) This is because the court concluded that there are both risk enhancements and risk mitigants in dealing with a chapter 11 debtor, and that they should be seen as balancing C. Fourth Circuit: The Fourth Circuit has also approved the coerced
method for determining the cram down interest rate. United Carolina
Bank v. Hall, 993 F.2d 1126 (4th Cir. 1993).
1. The Fourth Circuit indicated that under chapter 13 the court should treat the loan to the debtor as a new loan and match its rate of return to what the lender would "otherwise be able to obtain in its lending market."
When it is recognized that every secured creditor has a limited amount of credit on which to draw, then it follows that utilizing some of that borrowing capacity without providing the secured creditor with the usual return on its capital produces a loss for the secured creditor.... Therefore we conclude that it is fairer to treat the value of the collateral retained by the debtor under the "cram down" provision of Chapter 13 as a new loan and to match its rate of return to the secured creditor with that which the creditor would otherwise be able to obtain in its lending market.
2. In essence, the court emphasized the preva iling market for similar loans.
3. The court also imposed a ceiling, stating that the interest rate should not exceed the contract rate. According to one commentator, “the Fourth Circuit would not allow the creditor to present evidence that interest rates have risen since the contract.” Monica Hartman, Selecting the Correct Cramdown Interest Rate in
Chapter 11 and Chapter 13 Bankruptcies, 47 UCLA L Rev. 521
D. Fifth Circuit. The Fifth Circuit broadly approved the use and underlying
theory of the coerced loan method in a Chapter 13 case Green Tree
Financial Servicing Corp. v. Smithwick, (In re Smithwick), 121 F.3d 211
(5th Cir.1997) cert. denied 523 U.S. 1074, 118 S.Ct. 1516, 140 L.Ed.2d 669 (1998).
1. The Fifth Circuit suggested that the coerced loan theory was “consistent with the approach we have taken in Chapter 11 cases in attempting to find the rate which best calculates the present value of the payments offered under the plan.” Id. at 214.
2. But does Smithwick pertain in a Chapter 11 case? In one relatively recent case, the Bankruptcy Court heard extensive argument to the effect that Smithwick did not change the general rule that the interest rate determination is fact specific, and that the coerced loan method need not be followed. In re Richard, 241 B.R. 403 (Bankr. E.D. Tex. 1999).
(a) The court said that in a Chapter 13 case Smithwick has clearly embraced the coerced loan theory: “courts and commentators have widely recognized that Smithwick represents a wholesale adoption of Jones’ coerced loan theory, including adoption of its precise methodology for rebutting the presumption that the contract rate is the appropriate discount rate under [Chapter 13].” Id. at 407. (b) “The Fifth Circuit [in Smithwick] specifically stated that
the more flexible standard adopted in Briscoe and T-H
New Orleans for Chapter 11 cases is inapplicable in a
Chapter 13 context because [of the need to reduce litigation expenses].2 Id. at 409.
3. The Fifth Circuit also endorsed the rebuttable presumption approach of the Third Circuit in GMAC v. Jones that the contract rate is the appropriate rate in a Chapter 13 case because of the need to minimize administrative and litigation costs in a Chapter 13. 4. The Fifth Circuit also referred to its earlier decision in In re
Briscoe Enterprises, Ltd., II, 994 F.2d 1160 (5th Cir. 1993) where the Fifth Circuit held that the bankruptcy court is to “make a factual determination of the interest rate appropriate under all the circumstances and to evaluate whether the payments under the plan will provide the creditor with the present value of his allowed secured claim.” Id. at 213.
2
5. The Court noted that Fifth Circuit had declined to “establish a particular formula for the cramdown interest rate in Chapter 11 cases.” Id. at 213.
E. Sixth Circuit: Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427, 431
(6th Cir.1982) (in the absence of special circumstances bankruptcy courts should use the current market rate of interest used for similar loans in the region).
F. Seventh Circuit: Koopmans v. Farm Credit Services of Mid-America (In re Koopmans), 102 F.3d 874, 875 (7th Cir.1996). “The creditor is entitled
to the rate of interest it could have obtained had it foreclosed and reinvested the proceeds in loans of equivalent duration and risk.” 1. But note, court also applied the prime rate of interest plus a risk
premium in a Chapter 12 case, while not mandating the formula method.
2. “In reality, however, the Seventh Circuit’s rationale is that of the forced loan decisions: Koopmans cites Jones [with approval.]”
In re Scott, 248 B.R. 786, 791 (Bankr. N.D. Ill. 2000).
G. Eight Circuit: United States v. Doud, 869 F.2d 1144 (8th Cir. 1989). The Eighth Circuit appears to approve of a case-by-case analysis, although approving the use of risk free rate plus additional points to compensate for risk.
1. However, the Eighth Circuit also cited with approval the classic formulation of the coerced or comparable loan theory, stating that in determining the interest rate, “the court must consider the prevailing market rate for a loan of a term equal to the payout period, with due consideration for the quality of the security and the risk of subsequent default.” In re Lockard, 234 B.R. 484 (Bankr. W.D. Mo. 1999).
2. Some courts ha ve criticized the Eight Circuit for appearing to approve of the market rate approach, yet in reality, utilizing the formula approach of a risk free base, plus risk adjustments. For such a critique, see Hardzog v. Federal Land Bank of Wichita (In
re Hardzog), 901 F.2d 858, 860 (10th Cir.1990)
H. Ninth Circuit: Maintenance Contractors Inc. v. Camino Real Landscape Maintenance Contractors Inc. (In re Camino Real Landscape Maint. Contractors Inc.), 818 F.2d 1503 (9th Cir. 1987).
1. The Ninth Circuit cited with approval the “prevailing market test” as set forth in Collier’s, noting also that the Treasury rate reflects an “appropriate starting point for calculating the [cram down] rate of interest.” Id. at 1506.
I. Tenth Circuit: Hardzog v. Federal Land Bank of Wichita (In re Hardzog), 901 F.2d 858, 860 (10th Cir.1990). (“Considering that most
courts are utilizing a market rate approach. . . we hold that in the absence of special circumstances, such as the market rate being higher than the contract rate, Bankruptcy Courts should use the current market rate of interest used for similar loans in the region.”)
J. Eleventh Circuit: Matter of Southern States Motor Inns, Inc. 709 F.2d
647, 650 (11th Cir. 1983), cert. denied, 465 U.S. 1022, 104 S.Ct. 1275, 79 L.Ed. 2d 680 (1984).
1. In the Eleventh Circuit, creditors who are to receive deferred payments are entitled to interest on their claims at the prevailing market rate. See Southern States. However, this decision does not subscribe to any particular approach.” In re Hollinger, 245 B.R. 691, 693 (Bankr. N.D. Fla. 2000), vacated at 2001 WL 1042566 (N.D. Fla).
K. Other cases applying the coerced loan approach
1. In re Haskell, 252 B.R. 236 (Bankr.M.D.Fla.2000) (applying
coerced loan approach in Chapter 13 case where there was evidence that no lender would extend a loan to debtor for less than the 18% statutory interest rate for delinquent real estate taxes);
2. In re New Midland Plaza Assoc., 247 B.R. 877
(Bankr.S.D.Fla.2000) (adopting coerced loan approach in the context of a Chapter 11 reorganization case);
3. In re Star Trust, 237 B.R. 827 (Bankr.M.D.Fla.1999) (courts
should attempt to place the secured creditor in as good a position as it would have been had the present value of its claim been paid immediately);
4. In re Felipe, 229 B.R. 489 (Bankr.S.D.Fla.1998) (adopting the
coerced loan approach and requiring current market rate of interest in Chapter 13 cases to be determined through evidentiary
5. In re Oglesby, 221 B.R. 515 (Bankr.D.Colo.1998) (accepting the
coerced loan approach as bound by Hardzog, using rate charged for a similar loan under similar circumstances; alternatively, looking to contract rate at time of confirmation);
6. In re Segura, 218 B.R. 166 (Bankr.N.D.Okla.1998) (reluctantly
adopting the coerced loan approach in deference to the Tenth Circuit's decision in Hardzog, but preferring the Second Circuit's approach in Valenti);
7. In re Smith, 192 B.R. 563 (Bankr.W.D.Okla.1996) (adopting
analysis and procedure of Third Circuit in GMAC v. Jones as consistent with Hardzog);
8. In re Mellema, 124 B.R. 103 (Bankr.D.Colo.1991) (following
Hardzog); IV. “Risk plus” Formula.
A. Another method of determining the appropriate cram down interest rate is to calculate the interest rate by adding a “risk factor” to the some standard measure of “risk free” lending, such as a United States Treasury bill. B. Profit factor. It is said that the major distinction between the risk free
formula approach, and the “coerced loan” approach is that the coerced loan permits the lender to impose a profit component on the debtor; that is, the new loan pricing reflects the profit the lender would have made in the market. The formula approach seeks to use the risk free rate, which is essentially cost of funds, plus an inflation component. Then, the court may increase the risk for perceived risk of default. It is not always clear that the two approaches will yield different results, or that one will necessarily be lower than the other.
C. Second Circuit. The only circuit to require this method is the Second
Circuit, although other courts have utilized a similar approach, even though not necessarily requiring such an approach. In re Valenti, 105 F.3d 55, 64 (2d Cir.1997) (citing In re Smith, 178 B.R. 946, 951 (Bankr.D.Vt.1995).
1. The court gave the following rationale:
This method of calculating interest is preferable to either the 'cost of funds' approach or the 'forced loan' approach because it is easy to apply, it is objective, and it will lead to uniform results. In addition, the treasury rate is responsive to market conditions. Id.
We believe that courts adopting the “forced loan” approach misapprehend the “present value” function of the interest rate. The objective of §1325(a)(5)(B)(ii) is to put the creditor in the same economic position that it would have been in had it received the value of its allowed claim immediately. The purpose is not to put the creditor in the same position that it would have been had it arranged a new loan. Id.
2. However, noting that the treasury rate was "virtually risk- free," the court held that the cramdown rate "should also include a premium to reflect the risk to the creditor in receiving deferred payments under the reorganization plan," and cited authority for the risk premium of between one and three percent.
3. Accord In re Carson, 227 B.R. 719 (Bankr.S.D.Ind.1998)
(applying the prime rate plus 1-1/2%). D. Cases applying the formula approach:
1. See also, In re Milham, 141 F.3d 420, 424 (2d Cir.1998) (restating holding of In re Valenti);
2. In re Koopmans v. Farm Credit Services, 102 F.3d 874 (7th
Cir.1996) (applying the prime rate of interest plus a risk premium in a Chapter 12 case, but not mandating the formula method); 3. United States v. Doud, 869 F.2d 1144, 1145 (8th Cir.1989)
(applying, but not specifically mandating, the formula method in a Chapter 12 case);
4. In re Hollinger, 245 B.R. 691, 696 (Bankr.N.D.Fla.2000)
(applying the formula method because "creditors are not
overcompensated, the debtor is not over burdened, the rate is easy to determine, and the factors laid out by the Eleventh Circuit in
Southern States are considered.");
5. American General Finance, Inc. v. Kleinknecht, 230 B.R. 207, 212
(M.D.Ga.1999) (either formula method or coerced loan method approach is appropriate "so long as the bankruptcy court gives appropriate consideration to all relevant factors.");
6. In re Marfin Ready Mix Corp., 220 B.R. 148, 164
(Bankr.E.D.N.Y.1998) (applying current rate on a U.S. Treasury instrument plus a risk premium of from one to three percent);
7. In re St. Cloud, 209 B.R. 801, 807 (Bankr.D.Mass.1997) (finding
the coerced loan approach "unfairly enhances position of lender by including a profit component," and applying instead a risk free rate to which a risk premium is added);
8. In re Hudock, 124 B.R. 532, 534 (Bankr.N.D.Ill.1991) ("[T]he
Bankruptcy Code protects the creditor's interest in the property, not the creditor's interest in the profit it had hoped to make on the loan.");
9. In re Fowler, 903 F.2d 694, 698 (9th Cir.1990) (the bankruptcy
court did not err in using the formula approach to determine cramdown interest rate in Chapter 12 case, but case would be remanded to bankruptcy court for findings supporting its use of .75 percent risk factor);
10. In re Eastwood Partners Ltd. Partnership, 149 B.R. 105 (Bankr.
E.D. Mich. 1992) (market rate is appropriate rate; for ten year loan, approved 8.75% for first 5 years, with 9.5% thereafter, as proposed by the debtor);
11. In re Park Avenue Partners Ltd. Partnership, 95 B.R. 605 (Bankr.
E.D. Wis. 1988), the court found that with the prime rate at 10% the appropriate rate for a single-asset debtor with a substantial risk of repayment was 14%;
12. In re National Real Estate Ltd. Partnership, II, 87 B.R. 986
(Bankr. E.D. Wis. 1988) (lender entitled to an interest rate that reflects current market conditions and attendant risk adjustments).
V. Cost of Funds.
A. The costs of funds approach seeks to set the interest rate at what it would cost the lender to obtain the funds from its own source of capital.
B. It is said that the theory which justifies this approach is that “[C]ramdown prevents a creditor from immediately receiving the cash that would result from taking possession of its collateral, but that the creditor could obtain this cash simply by borrowing the collateral value from its own lenders. Thus, the theory proposes, the creditor will receive the economic
equivalent of taking possession of its collateral if the cramdown interest rate is set at the rate the creditor would pay to borrow on its own account.”
C. Cases applying this method include the following:
1. In re Hudock, 124 B.R. 532, 534 (Bankr.N.D.Ill.1991), which
found that the cramdown interest on a Chapter 13 automobile loan should be at the prime rate, since this best approximates "the rate at which [the secured creditor] borrows the money it then uses to make loans to consumers.
2. See also, the Second Circuit accepted the rationale of the cost of funds approach in In re Valenti, 105 F.3d 55, 63-64 (2nd Cir.1997), but declined to approve its application, primarily because of difficulties in administration.
VI. Application to Commercial Real Estate Cases: Use of the Band of Investment Model.
A. As noted above, most of the Circuits now employ a method which ultimately looks to the lender’s prevailing market rate of interest. However, in the real estate context, this may present certain difficulties. B. During the 1990’s, the effect of a typical real estate cram down was to
reduce the principal amount of the loan to the value of the collateral. This would then have the resulting effect of making the new loan a 100% loan to value transaction. As numerous experts testified, there is no real- world market for 100% loan to value first mortgages.
C. In re Birdneck Apartment Associates, 156 B.R. 449 (Bankr. E.D. Va.
1993) the bankruptcy court held that the interest rate used to calculate the present value of a secured claim is the market rate of interest for loans of like terms, with due consideration for the quality of the collateral and the risk of subsequent default.
D. In Birdneck, because there was no actual market for an under secured creditor and no 100% loan to value financing, the court approved the expert’s use of the “mortgage-equity/bank of investment analysis.” E. This method consisted of a 70% first priority debt component and a 30%
second priority equity component. The court found that first trust loans were being made at a current market rate of 8.66 percent, and that the equity investor would want a return of 14 percent. By blending these rates, the court concluded that a hypothetical market rate would be 10.74%.
F. The band of investment approach was also utilized in In re DeLuca, 1996 WL 910908 (Bankr. E.D. Va. 1996). Court applied mortgage –equity band of investment for first mortgage on apartment complex; blended rate yielded a 9% interest rate, with the equity component being 14% and the debt component being 7.8%.
G. The band of investment methodology was cited with approval, in dicta, by Bankruptcy Judge David Adams in In re Byrd Foods, Inc., 253 B.R. 196 (Bankr. E.D.Va. 2000).
H. The band of investment approach is a good strategy for lenders to utilize in over leveraged projects as it create a plausible argument for a higher interest rate.
I. Whether this approach will find much utility in a de- leveraged market, such as exists in today’s environment seems much less likely.
VII. Covenants.
A. In addition to an adjustment of the interest rate, a proposed plan of reorganization may propose to adjust or change the loan covenants. B. In re Seatco, Inc., 259 B.R. 279 (Bankr. N.D. Tex. 2001) Judge Barbara
Houser ruled that a lender has no right to insist that the existing loan provisions be carried forward into the new debt instrument which the secured lender will receive in conjunction with the reorganization. C. CIT objected to the plan of reorganization on the grounds that under
its pre-petition revolving loan agreement it had certain loan covenants, including the use of a lock-box to collect receivables, and the right to pay down the existing loan from the lock box, and then to make new advances pursuant to the evaluation of the debtor’s collateral. Those provisions were apparently deleted from the debtor’s plan of reorganization.
D. The bankruptcy court held that the argument that the lender was entitled to “indubitable equivalent” under a plan that proposed to permit it to retain its lien and receive the present value of its claim was not required, and indeed, not even a plausible argument. “CIT cites no authority to support its contentions. This absence of authority is not surprising because the plain meaning of various provisions of the Bankruptcy Code compels the opposite conclusion.” Id. at 287.
E. The statutory basis for modification is found, among other places, in section 1123(b)(5) which states that “a plan may modify the rights of holders of secured claims, other than a claim secured by a security interest in real property that is the debtor’s principal residence. . .”
F. Thus, the Court held, “[ T]he bankruptcy Code clearly permits a
modification of the prepetition loan agreement of a secured lender who advanced monies under a prepetition revolving loan credit. . .”
