After nearly fifteen years of unsuccessful attempts to recover $71 million worth of securitized bonds after the 1990 bankruptcy of Continental Airlines, Inc., Bluebird Partners L.P. may have suffered its final defeat. In a recent decision by a New York trial court in Bluebird Partners v. The Bank of New York, et al., No. 601016/1996 (New York Co. June 7, 2010), the court granted summary judgment to defendant Bank of New York (“BNY”), holding that the bank behaved prudently in establishing a litigation reserve fund as the collateral trustee in the airline’s bankruptcy.

The U.S. Court of Appeals for the Third Circuit, in In re Philadelphia Newspapers LLC,1 has ruled that secured creditors do not have a right, as a matter of law, to credit bid their claims when their collateral is sold under a plan of reorganization. The Third Circuit held that secured creditors may be barred from credit bidding where a debtor's reorganization plan provides secured creditors with the "indubitable equivalent" of their secured interest in the assets. The court's ruling follows a similar ruling last year by the U.S.