In re Philadelphia Newspapers, LLC, et al.1: Lenders Purchase Debtors’ Assets Pursuant to Chapter 11 Plan in Response to Denial of Right to Credit Bid
As discussed in our alert memo, dated March 25, 2010, the United States Court of Appeals for the Third Circuit held in In re Philadelphia Newspapers, LLC, et al.2 that a dissenting class of secured creditors does not have an absolute right to credit bid where its collateral is being sold free and clear of the secured creditors’ liens pursuant to a Chapter 11 plan (please click here to view the March 25 alert memo). We suggested in the March 25 alert memo that when faced with a denial of a right to credit bid, “[l]enders … may well attempt to submit cash bids on their collateral in order to prevent the risk of undervaluation, reasoning that the proceeds of any successful bid will merely flow back to them on account of their secured claims.” The prepetition lenders in Philadelphia Newspapers did just when they submitted a cash bid at auction, and Philadelphia Newspapers LLC and its affiliated debtors (the “Debtors”), in consultation with the creditors’ committee appointed in the Chapter 11 cases, determined such bid to be the highest and best bid for the assets being sold.Location