SAN DIEGO. On December 12, 2011, the US Supreme Court granted certiorari in RadLAX Gateway Hotel, LLC v. Amalgamated Bank to resolve the Circuit court split over whether secured creditors are guaranteed the right to credit bid their debt in a sale of their collateral conducted under a "cramdown" plan of Chapter 11 reorganization.
Section 1129(b)(2)(A)(iii) of the Bankruptcy Code allows a court to find that a Chapter 11 “cramdown” plan is “fair and equitable” to an objecting class of secured creditors if the plan provides for the realization by such holders of the “indubitable equivalent” of their claims. Section 1129(b)(2)(A)(ii) permits the sale of collateral free and clear of liens if secured creditors are allowed to “credit bid” (to bid the value of their claim in an auction of the collateral).
The Supreme Court is expected to hear the case in March or April 2012, with a decision to be issued during the summer.
