June 4, 2012
Supreme Court Protects Credit Bid in Cramdown Bankruptcy Plan
On May 29, 2012, in RadLAX Gateway Hotel LLC v. Amalgamated Bank,the U.S. Supreme Court unanimously held that a debtor-owner of a hotel encumbered by a mortgage lien securing over $120 million of indebtedness could not obtain confirmation of a chapter 11 plan proposing to sell the hotel free of the lien to a stalking horse bidder offering $55 million cash, or to any bidder offering more, unless the mortgagee were allowed to credit bid up to its full claim.
Justice Scalia called it "an easy case" of statutory construction of Bankruptcy Code section 1129(b)(2)(A).
As this Ropes & Gray client alert notes, "[t]his decision resolves a split among the Circuits that caused uncertainty for lenders and encouraged forum shopping among debtors."
See this Proskauer client alert for some of the implications of the ruling.
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