As reported previously, the majority of Chapter 11 cases filed today do not result in a reorganization of the debtor but rather a sale of the business. For this reason, the rights of a secured creditor to “credit bid” at the sale up to the amount of the debt—which usually far exceeds the value of the assets—presents a critical gating issue.
This issue of credit-bidding is so important that after a number of decisions were issued by several courts of appeals, including decisions issued by the U.S. Court of Appeals for the Third Circuit in In re Submicron Systems, 432 F.3d 448 (3d Cir. 2006), and In re Philadelphia Newspapers LLC, 599 F.3d 298 (3d Cir. 2010), the U.S. Supreme Court took up the issue in 2012. Well, credit-bidding is back in the spotlight again.
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