11 U.S.C. § 363(k) Allows A Secured Creditor To Credit Bid Up To The Full Face Value Of Its Claim, Even When The Collateral Securing The Claim Has No Economic Value
Cohen v. KB Mezzanine Fund II (In re Submicron Sys. Corp.), 432 F.3d 448 (3d Cir. 2006) (Circuit Judge Thomas L. Ambro)
The Plan Administrator for the Debtor’s estate commenced an adversary proceeding seeking to recharacterize the secured claims of insiders of the debtor from debt to equity, or in the alternative, to equitably subordinate the claims and impose a constructive trust. The District Court entered judgment in favor of the defendants, and the Third Circuit affirmed. The Third Circuit held that the creditors’ security interests were properly perfected, and that their credit bids to purchase assets of the debtor were not capped by the economic value of the collateral securing their claims. Instead, they could credit bid up to the full face value of their secured claims.
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