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The U.S. Court of Appeals for the Seventh Circuit’s recent decision in In re River Road Hotel Partners1 has created a significant circuit split regarding the rights of secured creditors to credit bid when their collateral is proposed to be sold free and clear of liens pursuant to a plan. Prior to River Road, both the Fifth Circuit in In re Pacific Lumber Co.2 and the Third Circuit in In re Philadelphia Newspapers, LLC3 held that secured creditors could be prohibited from credit bidding in connection with “free and clear” plan sales of their collateral so long as the secured creditors received the “indubitable equivalent” of their allowed secured claims pursuant to §1129(b)(2)(A)(iii) of the Bankruptcy Code. In River Road, the Seventh Circuit reached a contrary decision, concluding that, absent consent, §1129 of the Bankruptcy Code requires that secured creditors be afforded the right to credit bid when their collateral is sold at auction free and clear of liens pursuant to a plan. As discussed below, this circuit split, as well as the River Road decision itself, has important implications for debtors and secured creditors alike.

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