The evolution of credit bidding : its recent journey and logical next step
University of British Columbia
Master of Laws - LLM
Credit bidding is a US construct that enables secured creditors to use their secured claims, instead of having to raise additional capital, to bid on their collateral at an asset sale. The US legislature amended the bankruptcy statutes to include credit bidding specifically to prevent the undervaluation of collateral. Recent US case law has re-evaluated when secured creditors are entitled to credit bid and when debtors might be able to deny this right through the use of a loophole subsection. This subsection allows a debtor to deny secured creditors the right to credit bid if the debtor can satisfy their claims by providing an “indubitable equivalent.” While the US Supreme Court ultimately determined that the indubitable equivalent subsection cannot be used to deny secured creditors the right to credit bid at an asset sale, the case law adeptly highlights the merits of credit bidding while demonstrating the dangers of specific legislation. Although Canada does not have legislation regarding credit bidding, it has nonetheless been incorporated into Canadian insolvency proceedings through cross-border cases. This thesis discusses both the benefits and issues involved with credit bidding in a US and Canadian context, reviewing relevant case law and legislation in both jurisdictions. It also discusses the current status of credit bidding in Canada, which, without specific legislation to state otherwise, current case law has found to be permissible but not a right. Consequently, this thesis proposes that credit bidding should be added to Canadian insolvency legislation.
Attribution-NonCommercial-NoDerivatives 4.0 International
Law, Faculty of