In In re Young Broadcasting, Inc., et al., 430 B.R. 99 (Bankr. S.D.N.Y. 2010), a bankruptcy court strictly construed the change-in-control provisions of a pre-petition credit agreement and refused to confirm an unsecured creditors' committee's plan of reorganization, which had been premised on the reinstatement of the debtors' accelerated secured debt under Section 1124(2) of the Bankruptcy Code.

Introduction

The second priority lien held by a junior lien holder is a property interest sufficient to trigger the protection of the automatic stay.In re Three Strokes L.P., 379 B.R. 804 (Bankr. N.D. Tex. 2008). Inasmuch as a senior lien holder’s foreclosure proceedings would have the effect of extinguishing the debtor’s second lien interest, a court may only lift the stay and permit the foreclosure to proceed upon such senior lien holder’s showing of adequate protection.

In the fallout of recent commercial mortgage-backed securities defaults, mortgage servicers have increasingly used receivership sales for commercial real estate assets, including last month’s sale of the Davis Building in downtown Dallas.

In re LTAP US, LLLP, Case No. 10-14125 (KG) (Bankr. D. Del. Feb. 18, 2011)

CASE SNAPSHOT

In re Olde Prairie Block Owner, LLC, Bankr. No. 10B22668 (Bankr. N.D. Ill. March 11, 2011)  

CASE SNAPSHOT

On June 28, 2011, the U.S. Court of Appeals for the Seventh Circuit held that secured creditors have a statutory right to credit bid1 their debt at an asset sale conducted under a "cramdown" plan. In re River Road Hotel Partners, LLC, ___ F.3d. ___, 2011 WL 2547615 (7th Cir. June 28, 2011).2 The Seventh Circuit's decision creates a split with recent decisions in the Third and Fifth Circuits regarding a lender's ability to credit bid its secured debt. See In re Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010); In re Pacific Lumber, Co., 584 F.3d 229 (5th Cir.

The United States Court of Appeals for the Seventh Circuit issued its much anticipated decision in In Re River Road Hotel Partners, LLC, __ F.3d __ (7th Cir., June 28, 2011). In the closely watched case, the Seventh Circuit declined to follow the Third Circuit’s decision in Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010), holding instead that secured lenders have the right to credit bid in “free and clear” asset sales where their liens are being stripped, whether those sales occur under section 363 of the Bankruptcy Code or under a chapter 11 plan.

Originally published in ABF Journal on May 20, 2015

Determining secured lender cramdown interest rates in Chapter 11 cases has been widely debated, and recent court rulings have proven to be inconclusive. Kaye Scholer Attorneys Madlyn Gleich Primoff and Holly Martin discuss the controversial issue, highlighting the ABI Commission’s recent recommendations that endorse a more favorable approach for secured lenders.

In a “loan-to-own” investment, an investor acquires secured debt at a discount to leverage the face amount of the debt in an asset purchase or debt-to-equity swap. For example, if an investor can buy US$50 million worth of debt for US$25 million, it can, in a bankruptcy proceeding, bid on the underlying assets that secure the debt at a 50 percent discount, because the investor can credit bid the face value of the debt as the equivalent of cash in a sale of collateral in bankruptcy, thus creating a competitive advantage over cash or strategic bidders.