The ability of secured creditors to credit bid, if the collateral securing their debt were sold in a bankruptcy proceeding, often is viewed as a fundamental creditor protection. A recent decision from the Court of Appeals for the Third Circuit, however, found that a secured creditor may not have that right if the collateral is sold pursuant to a plan of reorganization. In the Third Circuit’s decision in In re Philadelphia Newspapers, LLC, the court held that section 1129(b)(2)(A) of the Bankruptcy Code is unambiguous and that a plain reading of such provision permits a debtor to sell the collateral securing a secured lender’s loan without allowing the secured lender the opportunity to credit bid its claim, so long as the debtor’s plan provides the secured lender with the “indubitable equivalent” value of its collateral.
View full memo, Recent Case Furthers Trend Towards Limiting Secured Creditors’ Right to Credit Bid in Connection with Sales Under a Debtor’s Plan of Reorganization