When a Chapter 11 debtor proposes to sell secured assets prior to confirmation of a plan, it may not do so without providing its secured creditor with the right to “credit-bid” for the assets. 11 U.S.C. §363(k). “Credit-bid” in this context means bidding for the assets by a credit of up to the full amount of the secured creditor’s claim, even when the value of its collateral is worth less, and notwithstanding the general rule in bankruptcy that an allowed secured claim is limited to that value.
The rationale for providing a secured creditor with the right to credit-bid is to enable it to protect against “the risk that its collateral will be sold at a depressed price.” Radlax Gateway Hotel LLC v. Amalgamated Bank, 132 S. Ct. 2065, 2070 n. 2 (May 29, 2012). In other words, if the secured creditor believes its collateralized assets are being sold for too low a price, it can credit-bid for them and retain what it believes is their higher intrinsic value.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
