News for Credit Professionals
Law & Order: Bankruptcy a Hot Topic from Courts Local to Supreme
The Supreme Court announced that, in light of a ruling that conflicts with
two previous ones from other bankruptcy courts, it will consider the following
situation: “whether a debtor may pursue a chapter 11 plan that proposes to sell
assets free of liens without allowing the secured creditor to credit bid, but
instead providing it with the indubitable equivalent of its claim under Section
1129(b)(2),” likely this Spring. In essence, it will decide whether or not
creditors can use what is owed to them instead of cash in the bidding process
for assets. A final ruling on credit bidding would likely follow by about three
months.
The Supreme Court noted that a Seventh Circuit Court of Appeals in Chicago case
(RadLAX Gateway Hotel LLC v. Amalgamated Bank, 11-166) allowed a secured
creditor to bid its claim in lieu of a cash bid. That directly conflicts with a
pair of other cases including a Third Circuit decision in Delaware was in the
bankruptcy case of Philadelphia Newspapers LLC.
Meanwhile, on the municipal bankrupcty front, the Harrisburg, PA Chapter 9 saga
started increasingly resemble "Keystone Cops" as the city council's attorney
missed a deadline to appeal a judge's dismissal of its bankruptcy filing. U.S.
Bankruptcy Judge Mary France rejected an appeal by the city council’s attorney,
over her previous decision to disallow a municipal/Chapter 9 bankruptcy filing
coming from the state’s capital city. France rejected the infamous Chapter 9
filing, done largely because of runaway debt tied to a trash incinerator
project, last month on grounds that the city council was not legally authorized
to file it.
And, in Jefferson County, creditors tied to its Chapter 9 filing from the Fall
have asked to have the case dismissed, similarly to Harrisburg, on the argument
that its county commissioners were not authorized to do so. U.S. Bankruptcy
Judge Thomas Bennett is charged with considering the motion to dismiss on what
amounts to technicalities in the filing’s legitimacy.
Brian Shappell, NACM staff writer
