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Court Denies Secured Creditors' Right to Credit Bid in Sale Auction Where Plan of Reorganization Proposes 'Indubitable Equivalent' of their Claims

November 13, 2009

On Nov. 10, 2009, a Pennsylvania district court held that secured creditors do not have an absolute right to credit bid their debt under the Bankruptcy Code (the “Code”) in an asset sale conducted pursuant to a “cramdown” plan of reorganization that proposes to provide the secured creditors with the “indubitable equivalent” of their claims. In re Philadelphia Newspapers, LLC, Civil Action 09-00178 at 57 (E.D. Pa. Nov. 10, 2009). This decision is on appeal to the Third Circuit Court of Appeals.