The Editorial Staff of Commercial Bankruptcy Investor recently reviewed the seemingly earth-shaking Fisker and Free Lance Star-Publishing orders limiting credit bidding rights. The Editorial Staff concluded that much of the angst is misplaced and that credit bidders should try to be the least bit cool in credit bidding, in particular to avoid inequitable behavior in pressuring for quick sales to them in bankruptcy and to avoid credit bidding with problematic lien coverage of the property to be acquired.
In a further debunking of alleged earth shaking, Jonathan Band and Jonathan Friedland (each affiliated with this site) have rooted the two orders in the lien validity problems posed by the credit bidders. See the superb Jonathan Brand and Jonathan Friedland, “You Know About Fisker But Do You Understand Fisker?” 31 The Bankruptcy Strategist 9 (July, 2014).
Some technical discussion. Section 363(k) of the Bankruptcy Code limits credit-bidding rights by permitting them “unless the court for cause orders otherwise.” Commentators have worried that Fisker and Free Lance Star-Publishing have expanded the “cause” that courts may draw upon to limit credit-bidding rights. Brand and Friedland read the cases to turn on something other than “cause.” Credit-bidding rights in section 363(k) are premised upon a lien that “secures an allowed claim.” Liens that are invalid do not secure an allowed claim of the credit bidder, and cannot support a credit bid. This issue is preliminary to “cause” for limiting credit bidding on other grounds. Brand and Friedland explain how large lien validity problems loomed in both Fisker and Free Lance Star-Publishing.
The editors and editorial board of DailyDAC include preeminent restructuring and insolvency professionals, journalists, and editors. They are devoted to providing reliable and plain English education and deal intelligence about assignments, corporate bankruptcy, receiverships, out-of-court workouts an similar topics.
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