The Supreme Court Upholds a Secured Creditor's Right to Credit-Bid Under a Bankruptcy Plan of Reorganization

In an eagerly anticipated decision, the Supreme Court resolved a split of authority among the courts of appeal on the issue of whether a secured creditor is ensured the right to credit-bid in an asset sale conducted as part of the debtor’s Chapter 11 plan of reorganization. Credit bidding refers to the ability of a secured creditor to bid its debt up to the amount of its claim, rather than pay cash, at an auction sale of its collateral, allowing the secured creditor to purchase the property without an infusion of fresh capital. In RadLAX Gateway Hotel, LLC v. Amalgamated Bank, --- S. Ct. ----, No. 11-166, 2012 WL 1912197 (U.S. May 29, 2012), the Supreme Court unanimously affirmed the right of a secured creditor to credit-bid its claim in a sale that is part of a plan of reorganization.