Bobby Guy is a shareholder in
the national healthcare law firm
Polsinelli. He spends his time fixing,
buying, and selling struggling
companies, and is headquartered in
the firm’s Nashville office. He can be
reached at firstname.lastname@example.org. Guy
helps funds purchase underpriced
opportunities in time to preserve
value and jobs, and to help struggling
companies maximize their potential.
His clients include senior living
providers, hospitals and acute care
facilities, life science companies,
and private equity fund investors.
Bradley Gardner is an associate
in Polsinelli’s Kansas City office,
where his areas of focus are loan
enforcement and creditors’ rights.
He has worked for clients in a
variety of industries, including
finance, transportation, and
manufacturing, and has represented
clients in prelitigation negotiations,
trials, appeals, and bankruptcy
matters. He holds a bachelor’s
degree from the University of
Kansas and a law degree, cum
laude, from Georgetown University
Law Center. He can be reached
Meredith Hoberock is an associate
in Polsinelli’s Kansas City office,
where her areas of focus include
loan enforcement and creditors’
rights. She served as a judicial law
clerk in the U.S. District Court for
the Western District of Missouri
and was also editor-in-chief of the
Arkansas Law Review. Hoberock
holds a bachelor’s degree from
the University of Arkansas and
a law degree, magna cum laude,
from the University of Arkansas
School of Law. She can be reached
least some jurisdictions. Fortunately
for distress buyers, the majority of
courts reject Clear Channel.25 The result
is that loan-to-own buyers seeking
to use credit bid rights to buy assets
free and clear of junior liens should
be mindful of the particular court in
which the bankruptcy is pending.
Potential bankrupt sellers usually have
similar concerns about jurisdiction, as
Clear Channel may negatively affect
the value of their assets in a bankruptcy
sale and the amount of time that it takes
to close the sale. Therefore, would-be
buyers who are early enough to the
fray should make a point of helping
their seller pick the best jurisdictions
in which to file (or at least, the
jurisdictions to avoid) to help prevent
any uncertainties associated with Clear
Channel from infecting the sale. J
1 For a summary of developments regarding
loan-to-own strategies at the time, see
Bobby Guy, “Attacks Continue on Lenders’
Right to Credit Bid in 363 Sales,” Journal of
Corporate Renewal, Vol. 23, No. 4, May 2010.
2 ____ U. S. ____, 132 S.Ct. 2065 (2012).
3 510 B. R. 55 (Bankr. D. Del. 2014).
4 11 U. S.C. Section 363(k).
5 See M. Richman, “Pro: Loan-to-Own DIP
Lenders Should Not Be Allowed to Credit Bid,”
Am. Bankr. Instit. 25th Annual Spring Meeting
(Apr. 12-15, 2007), available at abi-org-corp.
LoantoOwnDIP.pdf (proposing that loan-to-own buyers should be required to pay cash
at bankruptcy 363 sales, on the assumptions
that ( 1) credit bidding chills auctions, and ( 2)
if the senior creditor’s claim is valid, it will
receive back most or all of its cash payment
in distributions in the case in any event).
6 The court in In re RML Development,
Inc. relied on Fisker, but only to conclude
that when the amount of an allowed claim
is in bona fide dispute, “cause” exists to
cap the claimholder’s right to credit bid at
the undisputed amount of the claim.
7 512 B. R. 798 (Bankr. D. Va. 2014).
8 Compare, for example, the 2006 case of In re
Radnor Holdings, Corp., 353 B. R. 820 (Bankr.
Del. 2006). where an unsecured creditors’
committee filed a massive complaint to block
the lender’s credit bidding rights, alleging
loan-to-own motives and inequitable conduct.
There, the court found that absent grounds for
equitable subordination (a high standard), the
would-be buyer should be allowed to credit bid.
9 11 U.S.C. § 1126(e).
10 634 F.3d 79 (2d Cir. 2011).
11 DBSD, 634 F.3d at 102 (quoting In re
Figter, 118 F.3d 635 638 (9th Cir. 1997).
13 Id. at 104.
14 Id. at 104-05.
15 No. 11-14071, 2012 WL 3638009, at 2-3
(Bankr. N. D. Cal. Aug. 22, 2012).
16 No. 10-50259, 2012 WL 2501064
(Bankr. D. Conn. June 27, 2012).
17 480 B. R. 66 (Bankr. D. Mass. 2012).
18 513 B. R. 56 (Bankr. S. D. N. Y. 2014).
19 453 B.R. 132 (Bankr. S.D.N. Y. 2011).
20 No. 12-00845-8-RDD, 2012 WL 6576416
(Bankr. E. D. N.C. Dec. 12, 2012).
21 Id. at 8.
22 353 B. R. 820 (2006). For a detailed
discussion, see M. Richman, “Pro: Loan-to-Own DIP Lenders Should Not Be
Allowed to Credit Bid,” supra at p. 95.
23 No. 08-61570-11, 2009 WL 3094930, at 1
(Bankr. D. Mont. May 12, 2009), vacated,
No. 08-61570-11-RBK, 2009 WL 10624435
(Bankr. D. Mont. June 29, 2009).
24 In re PW, LLC, 391 B. R. 25 (9th Cir. B. A. P. 2008).
25 Compare In re Boston Generating, LLC,
440 B.R. 302, 332 (Bkrtcy.S.D.N. Y. 2010); In re
Jolan, Inc., 403 B. R. 866 (Bankr. W. D. Wash.
2009); W. K. Lang Holdings, LLC, Case No.
13-11934, 2013 WL 6579172, at 1 (Bankr. D.
Kan. 2013); In re Nashville Senior Living,
LLC, 407 B. R. 222, 231 ( 6th.Cir. BAP 2009)
(stating that Clear Channel “appears to be
an aberration in well-settled bankruptcy
jurisprudence” that § 363(f) allows for sales
free and clear of junior liens), aff’d, Bankr. L.
Rep. (CCH) P 81843, 2010 WL 3447746 (6th
Cir. 2010); United States v. Asset Based Res.
Grp., LLC, 612 F.3d 1017, 1019 n. 2 (8th Cir.
2010); In re November 2005 Land Investors,
LLC, 2014 WL 223353 (D. Nev. 2014), with In
re Smith, Case No. 13-61627, 2014 WL 738784
(Bankr. D. Oregon 2014); In re Jaussi, 488 B. R.
456 (Bankr. D. Colo. 2013); In re Lehigh Coal
and Nav. Co., Case No. 08-51957, 2012 WL
27465 (Bankr. M. D. Pa. 2012); In re Yacoobian
Enterprises, L.P., Case No. 11-AP-01201, 2012
WL 3818194, at 1 (Bankr. C. D. Cal. 2012); In
re Nance Properties, Inc., Case No. 11-06197,
2011 WL 5509325 (Bankr. E. D.N.C. Nov. 8,
2011). For general background, see Bolnick,
J., “Revisiting Clear Channel: Acquiring Real
Property in a Section 363 Sale Free and Clear
of Liens,” 20 Am. Bankr. Inst. L.R. 517 (2012).