In the article, “Another Case To Further Fisker’s Credit-Bid Uncertainty,” published by Law360
in its Expert Analysis section, special counsel Ben Feder
discusses the chapter 11 cases of Fisker Automotive and Free Lance-Star Publishing Co.
The article focuses on recent rulings in these cases; in both instances the courts narrowed a secured creditor’s right to credit-bid its debt in connection with a sale of the debtor’s assets. The decisions have surprised many observers and “put the issue of credit bidding back on the table, particularly in so-called ‘loan to own’ situations where secured debt is purchased at a substantial discount for the purpose of effecting the acquisition of a distressed borrower.” The right of secured lenders to credit-bid the full amount of their debt was considered settled following the Supreme Court’s May 2012 decision in RadLax Gateway Hotel
. Ben’s article considers the broad implications of these rulings, including their potential significant impact on the secondary trading market for distressed debt, as well as the likelihood that another credit-bidding case will make its way to the Supreme Court.