Source: http://www.haynesboone.com/alerts/supreme-court-in-radlax-rules-that-cramdown-plans-providing-for-sales-of-secured-creditors-collateral-must-allow-for-credit-bid-rights
Timestamp: 2019-04-23 18:31:46+00:00

Document:
In what it described as "an easy decision," the U.S. Supreme Court issued its eagerly anticipated decision in RadLAX Gateway Hotel, LLC et al. v. Amalgamated Bank 1 on May 29, 2012. The high court's 8‑0 ruling, delivered by Justice Scalia, held that a Chapter 11 bankruptcy cramdown plan providing for the sale of a secured creditor's collateral free and clear of the secured creditor’s lien may not use Bankruptcy Code § 1129(b)(2)(A)(iii) to deny the secured creditor the right to "credit bid" on its own collateral.
Prior to the Third Circuit's March 2010 ruling in Philadelphia Newspapers3, it had been considered "common wisdom" among the bankruptcy community that non-recourse secured lenders were entitled either to be repaid for their loans or, absent repayment, to have the right to receive the collateral securing such loans. In the context of an auction, the secured creditor was protected from having to accept the proceeds of an unsatisfactory auction through its right to credit bid the full amount of its allowed claim and take back its collateral. Philadelphia Newspapers turned the "common wisdom" on its head.
The Bankruptcy Code provides two methods by which a debtor may sell substantially all of its assets. The first is a sale conducted pursuant to Bankruptcy Code § 363 and the second is pursuant to a plan under Bankruptcy Code § 1123(b)(4).
Although a bankruptcy court may generally confirm a Chapter 11 plan only if each class of creditors consents (and the other requirements of § 1129(a) are met), § 1129(b) would permit the court to approve a "cramdown" plan that includes the sale of a secured creditor's collateral over that creditor's objection, provided that "the plan does not discriminate unfairly, and is fair and equitable" with respect to that creditor, as determined by the bankruptcy court under § 1129(b)(2)(A).
See 11 U.S.C. § 1129(b)(2)(A) (emphasis added).
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1 See RadLAX Gateway Hotel, LLC, et al. v. Amalgamated Bank, 566 U.S. __ (2012).
2 The term "indubitable equivalent" was first coined by Judge Learned Hand in In re Murel Holding Corp., 75 F.2d 941, 942 (2d Cir. 1935). The term "indubitable equivalent" was later codified in Bankruptcy Code § 1129(b)(2)(A)(iii). Since the Bankruptcy Code does not define the term, however, it is left to a court of competent jurisdiction to determine whether any particular proposed plan treatment meets the standard.
3 See In re Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010).

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