The recent decision of the U.S. District Court for the Eastern District of Pennsylvania in the Philadelphia Newspapers matter1 has turned the question of whether or not secured creditors are entitled to credit bid their secured debt, in a sale taking place under a plan of reorganization, into a contentious issue.
Prior to this decision and that of the Fifth Circuit in Pacific Lumber,2 it was generally understood that secured lenders can always protect the inherent value of their collateral, whether via a credit bid at a sale of their collateral under either §363 of the Bankruptcy Code or pursuant to a plan of reorganization or, in the case of a non-recourse secured lender, through making an election under §1111(b) of the Bankruptcy Code.
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