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.
(Editor's Note: more on these and more bankruptcy stories in this week's eNews, being released late Thursday afternoon).
Brian Shappell, NACM staff writer