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Credit Bid Rights

Being Proactive: Steps a Supplier Can Take in the Face of Potential Customer Bankruptcy

The impending bankruptcy of a retailer is one of the most stressful experiences that a supplier may face. The supplier is confronted not only with the potential loss of a major customer, but also with the possibility of significant financial losses on account of unpaid accounts receivable. A supplier often finds itself scrambling to mitigate […]


Limiting Credit Bidding “For Cause” After In re Aeropostale

Section 363(k) of the Bankruptcy Code (the “Code”) allows a secured creditor to bid at a section 363 sale and use the amount of their claim to offset the purchase price at the sale, called “credit bidding.”[2]   A court may limit this right “for cause.”[3]  The “for cause” standard is not defined in the Code […]


90 Second Lesson: Credit Bidding in Plan Sales

Editors’ Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to info@dailydac.com and we will try to answer it. QUESTION: A private equity investor wrote in recently asking us to address credit bidding in the aftermath of Radlax. ANSWER: Thanks to the 2012 […]


Cram Downs and Artificial Impairments – Can a Debtor Rewrite its Own Credit Terms in a Bankruptcy?

It is a principle of credit lending that creditors should charge less in interest if they take on less risk, but can charge more interest (and thus make more profit) if they take on a greater risk. The “secured,” more “senior” creditors of a company (those whose debt is collateralized by some specific property that […]


RECOMMENDED READING: How Fisker and Free Lance Star-Publishing Did Not Alter Credit-Bidding

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 […]


Try to Be the Least Bit Cool: Credit Bidding Rights After Fisker and Free Lance Star-Publishing

Holders of secured debt now have two cases to make them nervous as to whether they got all they paid for with respect to their right to credit bid at a sale of the collateral in a section 363 sale in bankruptcy.  It may appear that both courts chopped back credit bidding rights solely to […]


Bid Now or Forever Hold Your Peace: Challenging the Results of a Section 363 Sale in Bankruptcy (In re New Energy Corp.)

You would like to purchase wind turbines in a lease-to-own scenario, that is, you would like to take possession of certain items and pay for the purchase or ownership over time or in a lump-sum at some point in the future.  You prefer this mode to an outright cash purchase because of your other cash […]


The Fisker Case: My Credit Bid Capped at the Amount I Paid for the Debt?

One way to purchase assets (including the assets of a business as a going concern) is to prevail at a foreclosure sale or a § 363 bankruptcy auction with a credit bid.  The first step is to acquire the senior secured debt on the assets at a steep discount.  The next step is to outbid […]


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