A secured creditor’s right to bid at any sale of its collateral by bidding up to the amount of its debt without having to pay cash. Unless the court orders otherwise, a secured creditor is allowed to credit bid at any sale of its collateral. At the time of this publication, the U.S. Courts of Appeal that have addressed whether a debtor may properly deny a secured creditor the right to credit bid at a sale of assets free and clear of liens under a contested plan are divided. The Third Circuit in In re Philadelphia Newspapers, LLC, 599 F.3d 298 (3rd Cir. 2010) and Fifth Circuit in In re Pacific Lumber Co., 548 F.3d 229
(5th Cir. 2009) held that a Chapter 11 debtor may satisfy the “fair and equitable” requirement of 1129(b)(2)(A) by proposing a sale of assets free and clear of liens under a plan without granting secured creditors the right to credit bid. The opposite decision was reached by the Seventh Circuit in Matter of River Road Hotel Partners, LLC, et al., 651 F.3rd 642 (7th Cir. 2011). On December 12, 2011, the U.S. Supreme Court granted the debtor’s petition for certiorari, in Rad LAX Gateway Hotel, LLC, et al. v. Amalgamated Bank, No. 11-166, that will presumably resolve the issue.
Bankruptcy Code § 363(k). See also 363 Auction, 363 Sale.