Clyde Bergemann, Inc. ("Bergemann"), appeals the district court's affirmance of the bankruptcy court's order authorizing a post-petition financing agreement between The Babcock and Wilcox Company, Inc. ("B&W"), Diamond Power International, Inc. ("Diamond Power"), Babcock & Wilcox Construction Co., Inc., Americon, Inc. (collectively, the "debtors"), and Citicorp North America, Inc. ("CNA"). Finding no error, we affirm.

Bergemann, a competitor of Diamond Power's, filed in 1999 a patent infringement suit, which is currently pending, seeking $52 million damages. In February 2000, the debtors filed voluntary chapter 11 petitions in response to unrelated mass tort litigation,1 and the bankruptcy court administratively consolidated the debtors' cases. At the same time they filed the petitions, the debtors filed a motion (the "DIP financing motion") with the bankruptcy court seeking authorization under 11 U.S.C. §§ 105, 361, 362, 363, and 364(a) to enter into a post-petition financing arrangement with CNA, pursuant to a debtor-in-possession revolving credit facility (the "DIP financing agreement").

Under that agreement, the debtors received a $300 million line of credit and the ability to procure letters of credit, which allowed them to continue doing business. The agreement gave CNA a security interest in the debtors' assets: Any funds borrowed under the line of credit would give rise to a claim against the assets of all debtors, which claim would be accorded super-priority administrative expense status against all unsecured creditors of each debtor.2

The bankruptcy court granted the DIP financing motion in an interim order, to which Bergemann objected on the grounds generally that the interests of other creditors would be unfairly subordinated to CNA and specifically that the assets of Diamond Power might be exposed to claims by CNA.3 In response to Bergemann's objection, the debtors amended the agreement to include a clause providing that, in the event Diamond Power (or any other debtor) makes payments to CNA in excess of funds received by that debtor from CNA, the debtor will receive a claim against all other debtors, subordinate only to CNA's claim.4 Bergemann disagreed that this clause adequately protected its interests and continued to object to the DIP financing agreement.

In March 2000, after a hearing, the bankruptcy court issued a final order (the "DIP financing order") finding that the DIP financing agreement was necessary to the collective health of the debtors and that all the debtors would benefit from the agreement and authorizing the amended DIP financing agreement over Bergemann's objection. Bergemann appealed to the district court, which affirmed.

We review a bankruptcy court's conclusions of law de novo and findings of fact for clear error. Traina v. Whitney Nat'l Bank, 109 F.3d 244, 246 (5th Cir. 1997). "When the district court has affirmed the bankruptcy court's findings, the review for clear error is strict." Id.

Bergemann contends that the DIP financing order is improper because it substantively consolidates the debtors without following required procedures. Substantive consolidation is one mechanism for administering the bankruptcy estates of multiple, related entities,5 and the issue of the device's propriety in a particular case normally arises from a bankruptcy court's express order of consolidation. Bergemann admits that the bankruptcy court did not purport substantively to consolidate the debtors' estates but instead argues that that court performed a "de facto substantive consolidation."6 Bergemann cites no persuasive authority supporting that theory, however.7 Because we do not agree that the court's order is a substantive consolidation, we do not address the issue whether the court conducted a sufficient inquiry into its necessity.

The bankruptcy court's order authorized only a pre-confirmation financing arrangement involving all the debtors and from which each of the debtors benefits.8 As the district court noted, "[a]t most, what has happened here is that the lender-creditors under the DIP financing agreement could have access to the assets of debtors like Diamond Power in excess of the amount that Diamond Power benefitted from the agreement." Moreover, to the extent that Diamond Power is required to pay an amount disproportionate to funds it obtains through the agreement, its interests are protected by a super-priority claim against the other debtors under 11 U.S.C. § 364(c)(2). While the availability of a § 364(c)(2) claim may not fully protect Diamond Power's creditors,9 it does maintain the critical distinction between Diamond Power's assets and liabilities and those of the other debtors, negating the lynchpin of any substantive consolidation order: The DIP financing order does not combine the assets or liabilities of the debtors and does not establish a common pool of funds to pay claims.

Moreover, the order fails to exhibit any other properties commonly characterizing substantive consolidation: It neither extinguishes inter-debtor claims nor combines each debtor's creditors for purposes of voting on a reorganization plan. Bergemann's claim has not been consolidated with those of the other debtors' unsecured creditors, and Bergemann's recovery has not been limited to a pro-rata share equal to that of the other unsecured creditors. Almost none of the elements characteristic of a substantive consolidation order is present in the bankruptcy court's order. Thus, the order does not effect a substantive consolidation, de facto or otherwise.

Bergemann argues that the DIP financing order is invalid because it violates the absolute priority rule, embodied by 11 U.S.C. § 1129(b)(2)(B), which outlines the requirements for confirming a chapter 11 plan:

The court shall confirm a plan only if all of the following requirements are met:

. . . .

With respect to a class of unsecured claims--

(i) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value, as of the effective date of the plan, equal to the allowed amount of such claim; or

(ii) the holder of any claim or interest that is junior to the claims of such class will not receive or retain under the plan on account of such junior claim or interest any property.

(Emphasis added.) By its plain text, the absolute priority rule applies only to the confirmation of a chapter 11 plan--section 1129 is entitled "Confirmation of plan"--and therefore is inapplicable to the pre-confirmation DIP financing order.

Bergemann avers that the bankruptcy court attempted "to do outside a plan what it cannot do in a plan," citing In re Braniff Airways, Inc., 700 F.2d 935, 940 (5th Cir. 1983), for support. Bergemann reads Braniff too broadly, however. There the bankruptcy court approved a transaction under 11 U.S.C. § 363(b) that included the sale of substantially all the assets and the exchange of $2.5 million of the estate's cash for restricted travel scrip. This court reversed, finding that many of the activities contemplated by the transaction fell outside the provisions of § 363(b) authorizing the trustee to "use, sell or lease" the debtor's assets; moreover, we reasoned that the restricted nature of the travel scrip "had the practical effect of dictating some of the terms of any future reorganization plan," and concluded that after such a sale, "little would remain [of the estate] save fixed based equipment and little prospect or occasion for further reorganization. . . . [T]his [proposed sale] is in fact a reorganization." Id. at 940.

Braniff stands merely for the proposition that the provisions of § 363 permitting a trustee to use, sell, or lease the assets do not allow a debtor to gut the bankruptcy estate before reorganization or to change the fundamental nature of the estate's assets in such a way that limits a future reorganization plan. The DIP financing agreement contemplates neither of those functions; it merely allows the debtors to obtain the credit necessary to their continued vitality as going entities, pledging their assets as security for the credit. It neither changes the fundamental nature of the assets nor limits future reorganization options. Braniff does not compel application of the absolute priority rule in this case.10

Bergemann cites two additional cases for the proposition that the absolute priority rule applies in the pre-confirmation context; neither is persuasive.11 Instead, we agree that "[t]he absolute priority rule is a confirmation standard which does not apply to a preconfirmation contested matter involving a debtor's request to obtain senior credit." In re 495 Cent. Park Ave. Corp., 136 B.R. 626, 632 (Bankr. S.D.N.Y. 1992).12 Neither the plain language of the statute nor any persuasive authority favors application of the absolute priority rule before plan confirmation.

Even were we persuaded that the absolute priority rule permissibly could be extended to pre-confirmation financing arrangements, we would decline to do so here. The debtors established the necessity of the agreement, which included a provision protecting--at least in part--the interests of the existing creditors. In addition, Bergemann is an unsecured creditor that has not yet even prevailed on the suit underlying its claim. As the district court noted, "it is speculative whether Bergemann's claim will exist by the time this case reaches plan confirmation and whether the absolute priority rule would ever be invoked in this case." Thus, the bankruptcy court did not err in failing to apply the absolute priority rule.

Bergemann contends the financing agreement should not have been approved because it is effectively a fraudulent conveyance of Diamond Power's assets. The district court refused to address the merits of the argument, finding it waived. We agree.

To preserve an issue for appeal, a party must raise it before the trial court:

Citing cases that may contain a useful argument is simply inadequate to preserve that argument for appeal; "to be preserved, an argument must be pressed, and not merely intimated." In short, the argument must be raised to such a degree that the trial court may rule on it--a standard that clearly was not met in the instant case. The argument here was not even identified by name, much less advocated.

Matter of Fairchild Aircraft Corp., 6 F.3d 1119, 1128 (5th Cir. 1993) (quoting Hays v. Sony Corp., 847 F.2d 412, 420 (7th Cir. 1988)) (footnotes omitted).

Bergemann's brief to the bankruptcy court plainly argued two distinct theories: that the DIP financing agreement was a de facto substantive consolidation and that the agreement violated the absolute priority rule. Although Bergemann contends that it raised the issue of fraudulent conveyance sufficiently to avoid waiver, it can point to no assertion before the bankruptcy court that meets Fairchild Aircraft's strict standard. Bergemann admits that it referred to the issue only in passing--as part of its substantive consolidation argument--but reasons nonetheless that it preserved the issue by quoting two cases in its bankruptcy court brief: One expressed concern that "an overagressive approach [to substantive consolidation] could lead to a series of fraudulent conveyances being considered a commingling of assets that may justify substantive consolidation";13 the other stated that "[t]ransfers made to benefit third parties are clearly not made for 'fair consideration,'"14 which statement Bergemann contends is the definition of a fraudulent conveyance.

Neither quotation identified the issue of fraudulent conveyance sufficiently for the bankruptcy court to rule on it--one quotation used the term "fraudulent conveyance," but in an irrelevant context, and the other failed even to identify the relevant legal theory. Moreover, the quotations were accompanied by no discussion regarding how that theory applied to the DIP financing agreement. Instead, the unexplained quotations were buried in a section supporting a related, but distinct, argument.

The bankruptcy court could not have been expected to rule on the issue on the basis of those quotations alone. Bergemann waived the issue of whether the DIP financing agreement is a fraudulent conveyance.15

AFFIRMED.