COMPETITION, BARGAINING, AND EXCLUSIVITY UNDER THE NEW VALUE RULE - APPLYING THE SINGLE-ASSET PARADIGM OF BONNER-MALL

The author demonstrates arithmetically that in the single-asset reorga nization, the only way to ensure that all value in the estate is trans ferred to creditors-a necessary condition for satisfying the new value rule-is to eliminate the debtor's exclusivity and allow the secured c reditor and debtor to compete with each other for control of the postc onfirmation entity. By forcing the debtor to bargain with the secured creditor (and by enabling the secured creditor to bargain with the deb tor), the court will ensure that maximum value is transferred to all c reditors. In the course of his discussion, the author analyzes the Bon ner Mall case, a single-asset case, where the Ninth Circuit upheld the pre-Bankruptcy Code new value rule but preserved the debtor's ability to exclude competitors in the reorganization process. The article dem onstrates that the pre-Bankruptcy Code new value rule is incompatible with exclusivity, particularly in the single-asset model, in which the goal of exclusivity from the debtor's perspective is to shift value f rom creditors to prepetition owners.