Think Real Estate, March 2012

03/28/2012

Welcome to Think Real Estate, the real estate newsletter of Haynes and Boone, LLP, a resource for timely legal analysis of issues affecting the real estate industry. Our real estate lawyers represent clients in areas critical to the real estate industry and are engaged in every facet of buying, selling, developing, operating, leasing, capitalizing and financing real estate for operators, investors and users for both U.S. and international entities. For more information about our people and capabilities, visit our Real Estate Practice Group page.

Can Secured Creditors Credit Bid in Chapter 11 Plans? Supreme Court to Decide

The issue is whether a Chapter 11 plan can be crammed down over the secured lender's objection where the plan provides for the sale or transfer of the secured lender's collateral with the proceeds going to the secured without the secured lender having the right to credit bid for its collateral up to the full amount of its claim.

The answer to this critical question is split among the Circuit Courts of Appeal that most recently considered the issue. Two Circuit Courts, including the one that hears appeals from the popular Delaware Bankruptcy Court, have denied secured lenders the right to credit bid when their borrowers-debtors' proposed to sell or transfer real estate as part and parcel of their chapter 11 plans and force the secured lender to take the proceeds of sale as the " indubitable equivalent" of its claim. One Circuit Court, more recently, however, recognized the secured lender's right to always be able to credit bid in a plan context involving the sale or transfer of its collateral.

The Supreme Court decided to step in and resolve this split among the Circuits in an appeal due to be decided in 2012.

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