Court Denies Secured Creditors’ Right to Credit Bid at Sale of Their Collateral Pursuant to Bankruptcy Plan

November 19, 2009
In a decision that may affect the rights of secured lenders in bankruptcy sales, the U.S. District Court for the Eastern District of Pennsylvania ruled in In re Philadelphia Newspapers, LLC that it is permissible, in some circumstances, for a debtor to sell encumbered assets free and clear of liens without allowing a secured lender to credit bid. This update clarifies the decision and examines the implications, if upheld, for secured lenders in negotiations with their distressed borrowers.