RADLAX GATEWAY HOTEL V. AMALGAMATED BANK
132 S.Ct.2065 (2012)
NATURE OF THE CASE: Radlax (P) appealed an affirmation of a denial of its request to
confirm a 'cramdown' bankruptcy plan over Bank's (D) objection finding that a proposed
auction to sell the encumbered asset free and clear of a lien without permitting the bank to
credit-bid did not comply with 11 U.S.C.S. § 1129(b)(2)(A)'s requirements for cramdown plans.
FACTS: Ps planned to build a parking structure. Ps obtained a $142 million loan from
Longview Ultra Construction Loan Investment Fund, for which D serves as trustee. Eventually
Ps filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. Ps
submitted a Chapter 11 plan. The plan proposed to dissolve Ps and to sell substantially all
of their assets pursuant to procedures set out in a contemporaneously filed “Sale and Bid
Procedures Motion.” Ps sought to auction their assets to the highest bidder, with the
initial bid submitted by a “stalking horse”-- a potential purchaser who was willing to make
an advance bid of $47.5 million. Under Ps' proposed auction procedures, D would not be
permitted to bid for the property using the debt it is owed to offset the purchase price, a
practice known as “credit-bidding.” D would be forced to bid cash. Ps sought to confirm the
plan under the cramdown provisions of §1129(b)(2)(A). The Court denied the plan concluding
that the proposed auction procedures did not comply with §1129(b)(2)(A)'s requirements for
cramdown plans. The Bankruptcy Court certified an appeal directly to the United States Court
of Appeals for the Seventh Circuit. The court affirmed, holding that §1129(b)(2)(A) does not
permit debtors to sell an encumbered asset free and clear of a lien without permitting the
lienholder to credit-bid.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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