When the U.S. Court of Appeals for the Third Circuit handed down its decision in the Philadelphia Newspapers case last year, the restructuring world reacted with surprise.
Contrary to long-standing practice in the industry, the court in a 2-1 decision somewhat weakened the interests of secured creditors in bankruptcy by holding that such creditors could not prevent a debtor from cramming down a bankruptcy plan that purported to provide secured creditors with the “indubitable equivalent” of their claims through an auction sale of encumbered assets free and clear of liens and not subject to credit bidding by the secured creditors.1
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