SBLI Recent Developments in Credit Bidding. Kristopher M. Hansen, Matthew A. Garofalo and Sharon Choi 1. Introduction

Transcription

1 SBLI Recent Developments in Credit Bidding Kristopher M. Hansen, Matthew A. Garofalo and Sharon Choi 1 Introduction Several decisions over the last two years have had a pronounced impact on the rights of secured creditors to credit bid their debt when a debtor is attempting to sell their collateral. As set forth below, secured lenders should be aware of these decisions and the technical requirements associated with a credit bid not only when making new loans, but when purchasing existing loans where a potential course of action includes a bid for an obligor s assets. The General Right To Credit Bid A security interest is a property right, and as such is protected under various areas of law. One such protection is the right to credit bid. The right to credit bid is intended to give secured creditors protections against attempts to sell the collateral too cheaply; if the secured party thinks the collateral is worth more than the debtor is selling it for, it may effectively bid its debt and take title to the property. Beal Bank, S.S.B. v. Waters Edge Ltd. P ship, 248 B.R. 668, 680 (D. Mass. 2000) (quoting Collier on Bankruptcy, at [2][b]); In re Requilman, 2009 WL , at *5 (Bankr. N.D. Cal. 2009). In the bankruptcy context, the right to credit bid is contained in section 363(k) of the Bankruptcy Code. 2 Section 363(k) provides that, unless the court orders otherwise, holders of property that is subject to a lien that secures an allowed claim may bid at a sale of such property, and, if the holder of such claim purchases such property, such holder may offset such claim against the purchase price of such property. 11 U.S.C. 363(k). 1 Kristopher M. Hansen is a partner at Stroock & Stroock & Lavan LLP and is the Co-Chair of the firm s Financial Restructuring Department. Matthew Garofalo and Sharon Choi are associates at Stroock. 2 herein. State law may also give rights to credit bid, such as in a foreclosure sale, but such rights are not discussed

2 There are two primary scenarios where a secured lender s right to credit bid will be implicated: (i) in connection with a sale of the debtors assets pursuant to section 363 of the Bankruptcy Code (a 363 Sale ), or (ii) in connection with a sale of the debtors assets under a plan of reorganization pursuant to section 1129 of the Bankruptcy Code (a Plan Sale ). As discussed below, the structure of a proposed transaction may impact the secured creditor s right to credit bid. In either case, the sale is likely to be governed by court-ordered bidding procedures that, if drafted properly, will clarify the right (or lack thereof) to credit bid and advance the fight over the right to credit bid to the hearing to approve the bidding procedures instead of the sale hearing. When exercising its right to credit bid, a secured lender can typically credit bid the entire face amount of its debt, not just what that debt is trading at in the market. In re Submicron Sys. Corp., 432 F.3d 448, 459 (3d Cir. 2006) (stating that section 363(k) empowers creditors to bid the total face amount of their claims it does not limit bids to claims economic value ). Further, a credit bid is the functional equivalent of a cash bid and merely saves a step of payment by the lender, as buyer, to the lender, as seller, and thus acts as a convenience. In re Finova Capital Corp., 356 B.R. 609, (Bankr. D. Del. 2006). Accordingly, a properly submitted credit bid should top a lesser all-cash bid at an auction. This often allows a secured lender with a large amount of debt to bid substantially higher than the market value for an asset if it so chooses, effectively forcing other bidders to submit an offer that repays the credit bidding lender in full, in cash before it can place itself in a position to bid on equal footing with the incumbent secured party. 2

3 The right to credit bid, however, is not absolute. In re Theroux, 169 B.R. 498, 499 n.3 (Bankr. D.R.I. 1994) ( [T]here is no absolute entitlement to credit bid. ). As set forth above, a creditor may only credit bid against property that is subject to a lien that secures an allowed claim. See 11 U.S.C. 363(k). Accordingly, if the creditor does not have a valid lien on the property being sold, it may not credit bid in the sale of such assets. See Beal Bank, 248 B.R. at ; Bank of Nova Scotia v. St. Croix Hotel Corp. (In re St. Croix Hotel Corp.), 44 B.R. 277, 279 (Bankr. D.V.I. 1984) ( The intent of Section 363(k) is clearly to permit only those persons with a valid security interest in property to be sold to claim a setoff. ). The court may also deny a secured creditor the right to credit bid for cause. While cause is not defined under the Bankruptcy Code, it may be found where there is evidence of misconduct or other bona fide disputes exist regarding the collateral or the lien. See, e.g., In re Antaeus Tech. Servs., 345 B.R. 556 (Bankr. W.D. Va. 2005) (disallowing a credit bid where secured creditors conduct was viewed as not merely protecting the value of its collateral, but enhancing its position); In re Aloha Airlines, Inc., 2009 WL (Bankr. D. Haw., May 14, 2009) (disallowing a credit bid because the party making it had entered into an agreement with a third party that had engaged in misconduct with respect to the debtors); Nat l Bank of Comm. v. L.D. McMullan (In re McMullan), 196 B.R. 818, 835 (Bankr. W.D. Ark. 1996) (holding that a secured creditor could not credit bid because the validity of its liens and security interests are unresolved ); Morgan Stanley Dean Witter Mortgage Capital, Inc. v. Alon USA L.P. (In re Akard St. Fuels, L.P.), 2001 WL , at *3 (N.D. Tex. Dec. 4, 2001) (refusing a request to credit bid where the secured creditor s lien was subject to a bona fide dispute that could not be resolved before the sale). 3

4 Multiple Creditors in a Credit Bid Section 363(k) of the Bankruptcy Code provides that the holder of [a secured] claim may submit a credit bid. In cases where only one secured creditor exists there is no controversy as to who has the right to credit bid. However, present day capital structures are generally more sophisticated and many secured creditors may exist within the same loan or note, substantially complicating the issue. Recent cases have made clear that a secured creditor s right to credit bid its own secured claim may be contracted away. In early 2009, the Bankruptcy Court for the District of Delaware analyzed the issue of who was eligible to credit bid, and to what extent, in In re GWLS Holdings, Inc., 2009 WL (Bankr. D. Del. Feb. 23, 2009). In GWLS, the debtor sought to sell substantially all of its assets in a 363 Sale. The assets secured a syndicated loan and the collateral agent for the loan sought to purchase the assets with a credit bid on behalf of all of the first lien lenders. All but one of the first lien lenders consented to the purchase of the assets through a credit bid. This holdout lender, holding $1 million of $366 million of secured debt, argued that the collateral agent did not have the authority to bid the entire amount of the debt without the consent of all of the lenders. Absent such consent, the lender argued that the purchased assets should still be subject to the non-consenting liens, thus arguing effectively that the other lenders could become the owners of the assets subject to the $1 million debt held by the non-consenting creditor, who could then seek to enforce its lien and ostensibly be paid off by the new owners or refinanced. In defense of its position, the holdout lender argued, among other things, that the credit bid was a prohibited amendment or waiver of the credit agreement, which released 4

5 substantially all of the collateral without unanimous lender consent. 3 While the collateral was being released, the collateral agent asserted that, among other things, the lenders authorized the agent to take such actions on its behalf and to exercise such powers as delegated to the agent by the terms of the loan documents. 4 After reviewing the relevant provisions of the documents, the court sided with the collateral agent, allowing the collateral agent to credit bid all of the debt, including that of the holdout lender. The court concluded that (i) credit bidding by the agent was permitted as an exercise of remedies (which was a right delegated to the agent) and (ii) credit bidding is not a waiver, amendment, supplement or modification of the credit agreement that would require unanimous consent. Later that year, the Bankruptcy Court for the Southern District of New York was faced with similar facts in In re Metaldyne Corp., 409 B.R. 671 (Bankr. S.D.N.Y. 2009). In Metaldyne, as with GWLS, the debtors sought to sell substantially all of their assets pursuant to a 363 Sale. Similarly to the GWLS case, a holdout lender, holding only $3.5 million of the $425 million of secured debt, objected to the sale and argued that the agent could not credit bid 100% 3 The holdout lender also pointed to Section 11.1 of the Credit Agreement, which provided that no Credit Document nor any terms thereof may be amended, supplemented or modified in accordance with the provisions of this subsection (a) no such waiver and no such amendment, supplement or modification shall (i) release all or substantially all of the Collateral or alter the relative priorities of the secured obligations entitled to the Liens of the Security Documents, in each case without the written consent of all Lenders.... The holdout lender also pointed to Section 3.1(a)(ii) of the Intercreditor Agreement, which provided: (a) So long as the Discharge of the First Lien Obligations has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Borrower or any other Credit Party: (i) the First Lien Collateral Agent and the First Lien Secured Parties shall have the exclusive right to enforce rights, exercise remedies (including setoff and the right to credit bid debt) and make determinations regarding the release, disposition, or restrictions with respect to the Collateral without any consultation with or the consent of the Second Lien Collateral Agent or any Second Lien Secured Party. The holdout lender s point here was that the Intecreditor Agreement gave control to the agent and the lenders, not the agent alone. This language is common in intercreditor agreements, but its intent is rarely clarified by the document or the credit agreement or indenture it is issued in conjunction with. 4 In response, the agent pointed to Section 6.6 of the Collateral Agreement, which provided: If an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the other Secured Parties, may exercise... all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Collateral Agent... may sell, lease, license, sublicense, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof... 5

6 of the debt. The agent and the holdout lender each made arguments that were very similar to those in asserted in GWLS. The court, relying on the rationale from GWLS, which interpreted very similar provisions in the relevant documents, 5 held that in accordance with such provisions, each lender delegated to the agent the authority to credit bid for the debtors assets and to release collateral in connection therewith. Furthermore, relying on GWLS, the court concluded that a sale through a credit bid under section 363(k) does not require an amendment, waiver or modification of any loan document and therefore does not require the consent of all lenders pursuant to the amendment provision. 6 A similar result was reached in In re Foamex Int l Inc., No , (Bankr. D. Del. May 27, 2009) where the non-consenting lender held much more than the nominal amounts in 5 The holdout lender pointed to Section 9.02(b) of the credit agreement, which provided that the credit agreement may not be waived, amended or modified unless certain parties agreed, and that even then, such amendments shall not (vi) release all or substantially all of the Collateral from the Liens of the Security Documents, without the written consent of each Lender [.] The holdout lender also pointed to Section 5.01 of the Security Agreement, which provided: At any public... sale made pursuant to this Section, any Secured Party may bid for or purchase free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor... the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to Grantor therefor. The debtors and the agent argued that the same loan documents grant the agent the authority to credit bid and to release collateral on behalf of all of the lending parties, including the holdout lender. The debtors pointed to Article VIII of the credit agreement, which provided: Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent (it being understood that reference in this Article VIII to the Administrative Agent shall be deemed to include the Collateral Agent) as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The debtors and the agent also pointed to Section 5.01 of the Security Agreement, which provides that an Agent may exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the foregoing, each Grantor agrees... that the Collateral Agent shall have the right... to sell or otherwise dispose of all or any part of the Collateral... for cash, upon credit or future delivery as the Collateral Agent shall deem appropriate. 6 While not involving credit bids, the SDNY reached a similar decision in In re Chrysler, LLC 405 B.R. 84 (Bankr. S.D.N.Y. 2009). 6

7 GWLS and Metaldyne. In Foamex, the debtors sought to sell substantially all of their assets, and the agent, supported by 65% of the lenders, sought to credit bid. In opposition, one of the nonconsenting lenders submitted a cash bid against the agent and the majority lenders. At the auction, the agent credit bid $155 million for the assets of the debtor, while the lender s cash bid was for $151.5 million. The lender argued that the agent could only credit bid the amount of the loans consenting to the credit bid (approximately $100 million), thereby making the credit bid insufficient to top its cash bid. The court, however, approved the agent s credit bid, stating that it s a natural consequence of the authority given the agent in the credit agreement that it be able to do a 363(k) credit bid.... [t]o read it any other way would... lead to chaos in 363 sales. 7 While the aforementioned cases all involved secured bank debt, secured noteholders also have the right to credit bid. However, indentures are often structured differently than credit agreements, particularly with respect to the rights of the agent or trustee. The issue of secured noteholder credit bidding arose in In re Electroglas, Inc., No , (Bankr. D. Del. Sept. 23, 2009), where a group of secured noteholders holding a majority of the debt outstanding attempted to purchase the debtors assets through a credit bid without going through the trustee for the notes. The Bankruptcy Court reviewed the indenture provisions and determined that the noteholders could not credit bid their portion of the debt directly because doing so would 7 Additionally, the agent offered non-consenting lenders an option to cash out their loans instead of participating in the credit bid, however, the agent only offered a pro rata share of $146.5 million, not the $155 that it was bidding for the assets. A similar cash-out structure was proposed in In re Propex Inc., No (JCC) (Bankr. E.D. Tenn.), however the debtors selected an all cash bid as the winning bidder. While cash offers have been made available by majority lenders to placate minority lenders or to consolidate ownership of the asset, the process has never been required by a court. 7

8 prejudice other noteholders in violation of the indenture. 8 The court stated that it is clear the that Indenture and other agreements are set up for the benefit of Noteholders as a whole. The court further stated that only the indenture trustee could credit bid and the majority noteholders (i) could not force the trustee to place a credit bid and (ii) could not step into the shoes of the trustee to credit bid the entire debt. The court disallowed the noteholders credit bid for cause, finding that under the terms of the documents, only the trustee was authorized to submit a credit bid. Since the trustee did not submit the credit bid, such bid was disallowed. The Bankruptcy Court noted that the creditors could request the trustee to submit the credit bid and may have a private cause of action against the trustee if the trustee acted improperly (which the court did not rule on), but could not compel the trustee to submit a credit bid. The court s decision in Electroglas is interesting because most noteholders are of the view that a majority of the holders can direct their trustee to take almost any action so long as an indemnity is provided to the trustee. Indeed, in most indentures, a majority of the noteholders are empowered to direct the trustee with respect to time, method and place of exercising remedies on collateral. Electroglas stands in the way of this general perception, but future decisions with different language in the indenture may have different outcomes. The right to credit bid also may be impeded by the existence of an intercreditor agreement where the credit bidding party is a junior lienholder. Often, intercreditor agreements specify that junior lienholding parties are not permitted to take any action with respect to collateral unless and until the senior lienholder s claims are completely discharged. The 8 Section 7.4 of the Indenture provided: [I]t being understood and intended, and being expressly covenanted by the taker and holder of every Note with every other taker and holder and the Trustee, that no one or more holders of Notes shall have any rights in any manner whatever by virtue of or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other holders of Notes, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Note... 8

9 practical reality of these provisions, along with that of being a junior lien party, is that the credit bid must come only after the junior party also bids a sufficient amount of cash to repay all existing senior lien obligations or reaches an accord with the senior lienholder to assume the debt as part of the credit bid to purchase the liened assets. Additional Hurdles to Credit Bidding in Plan Sales In addition to the issues discussed above, secured creditors may face additional hurdles to credit bidding where a debtor attempts to sell assets under a plan of reorganization. A Plan Sale is specifically permissible under Section 1123(a)(D) of the Bankruptcy Code and section 1129(a) requires the plan to meet all of the confirmation requirements listed therein. If, however, a class of secured lenders does not consent to the plan (including the sale), the plan may only be confirmed under the cramdown provisions of 1129(b). In order to cramdown a dissenting class under section 1129(b) of the Bankruptcy Code, a plan to be fair and equitable with respect to each dissenting class of creditors. Section 1129(b)(2) provides three ways to confirm a plan over a dissenting class of secured creditors. Section 1129(b)(2)(A) provides, in summary, that a secured creditor can be crammed down if either (i) the creditor retains its liens and receives deferred cash payments equaling the value of its claim; (ii) in a sale, subject to 363(k), of property that is subject to liens securing its claim, that such liens attach to the proceeds of the sale (and such liens are then treated in accordance with prongs (i) or (iii)); or (iii) the creditor receives the indubitable equivalent of its claim. 9 As the right to credit bid in a Plan Sale is derived from 363(k), all of the issues set forth above apply to credit bidding in connection with a Plan Sale. Recent cases, however, have called into question whether secured creditors must even be given the right to credit bid in a Plan Sale. 9 Specifically, Section 1129(b)(2)(A)(ii) provides that for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale. 11 U.S.C. 1129(b)(2)(A)(ii). 9

10 Courts are generally in agreement that 1129(b)(2)(A) is stated in the disjunctive, meaning that each of sections (i), (ii) or (iii) can provide the independent basis for achieving cramdown. The case of In re CRIIMI MAE, Inc., 251 B.R. 796 (Bankr. Md. 2000) involved a broad objection by a secured creditor asserting that no plan that contemplates the sale of collateral of a dissenting class of secured claims can be found fair and equitable unless it complies with section 1129(b)(2)(A)(ii). In re CRIIMI MAE, 251 B.R. at 806. The Bankruptcy Court rejected that argument and instead found that the use of the or separating the provisions of section 1129(b)(2)(A)(i) through (iii) requires a reading in the disjunctive. Accordingly, a plan that does not permit credit bidding does not render the plan unconfirmable as a matter of law. Id. at 808. See also Wade v. Bradford, 39 F.3d 1126, 1130 (10th Cir. 1994) (noting that 1129(b)(2)(A) is written in the disjunctive, requiring the plan to satisfy only one before it could be confirmed over creditor s objection. ). However, since this case was merely at the disclosure statement stage, the court did not rule on whether the plan was confirmable, only that the plan could be solicitated. While this concept may have been generally accepted, no Circuit Court had officially ruled that a secured creditor s right to credit bid may be denied in a Plan Sale context until the 5th Circuit s decision in Bank of New York Trust Co. v. Official Unsecured Creditors Comm. (In re The Pacific Lumber Co.), 584 F.3d 229 (5th Cir. 2009). In Pacific Lumber, the plan proponent infused cash into the debtors and, in exchange for such cash, received the equity in the reorganized debtors. The secured noteholders received $510 million in cash (they were owed $740 million), which the Bankruptcy Court concluded was the value of their collateral. Since there was no auction, there was no right to credit bid, and the noteholders argued that the lack of such right made the plan unconfirmable under 1129(b)(2)(A)(ii). The Bankruptcy Court 10

11 confirmed the plan, stating that clause (ii) was inapplicable because the plan proposed a transfer of the assets under 1123(a)(5)(B), not a sale of the assets under Section 1123(a)(5)(D) of the Bankruptcy Code. On appeal, the Fifth Circuit disagreed, finding that the transfer was indeed a sale. Thus, because the noteholders were denied the right to credit bid in the sale, the plan did not satisfy 1129(b)(2)(A)(ii). The Fifth Circuit did not reverse confirmation, however, because it concluded that the plan satisfied the indubitable equivalent standard under 1129(b)(2)(A)(iii) by offering the secured noteholders immediate cash payment of the value of their collateral. The noteholders argued that depriving them of the right to credit bid also deprived them of the possibility of future increases to the value of the collateral. The court rejected this argument, stating that the Code does not protect a secured creditor s upside potential; it protects the allowed secured claim. Accordingly, by selling the secured lenders collateral (without a right to credit bid) and giving the secured creditor s the proceeds of such sale (i.e. the value of their collateral), the plan provided the indubitable equivalent of the secured lender s secured claim. While Pacific Lumber was the first Circuit Court to rule on this issue, the most notable case in this area is In re Philadelphia Newspapers, LLC, 599 F.3d 298 (3d Cir 2010). In Philadelphia Newspapers, the debtors filed a plan of reorganization that provided for a sale by public auction of substantially all of their assets. The plan provided for a purchase price of $30 million, plus other consideration that would yield approximately $41 million in gross proceeds to the debtors estates. The debtors anticipated a distribution to their secured lenders of approximately $36 million (the secured lenders were owed approximately $295 million) after 11

12 payment of administrative and priority claims, and outstanding debtor-in-possession financing facility advances. 10 The debtors motion seeking approval of the bid procedures stated that: The Plan sale is being conducted under sections 1123(a) and (b) and 1129 of the Bankruptcy Code, and not section 363 of the Bankruptcy Code. As such, no holder of a lien on any assets of the debtors shall be permitted to credit bid pursuant to section 363(k) of the Bankruptcy Code. The debtors argued that this structure would spur competitive bidding. The secured lenders objected to the bidding procedures as improperly denying them the right to credit bid. The secured lenders argued that because the plan called for a sale of assets, the court must apply prong (ii) of section 1129(b)(2)(A), which included the right to credit bid. They argued that a debtor should not be able to circumvent the credit bid protections of section 363(k) (and prong (ii) of section 1129(b)(2)(A)) when conducting an asset sale under a plan by using prong (iii) of section 1129(b)(2)(A), which provides for the indubitable equivalent of claims. The Bankruptcy Court upheld the lenders objection and denied the debtor s motion to approve the bid procedures, but the District Court overturned the Bankruptcy Court s ruling. The Third Circuit affirmed the District Court s decision, holding that a secured creditor may be crammed down if any one of the three prongs of section 1129(b)(2)(A) were satisfied. Therefore, if a creditor received its indubitable equivalent pursuant to prong (iii) of 1129(b)(2)(A), then the 363(k) protection under prong (ii) is irrelevant and does not need to be satisfied. In rendering this decision, the Third Circuit relied in part on the Fifth Circuit s decision in Pacific Lumber and looked to the plain meaning of the statute, and determined that the word or meant that a secured creditor could be crammed down if any one of the three 10 The plan provided that the distribution proceeds for each class of creditors, other than the secured lenders, were not contingent on the outcome of the auction and all proceeds of a cash overbid would flow directly to the secured lenders. 12

13 prongs of section 1129(b)(2)(A) were satisfied. Since prong (iii), the indubitable equivalent prong, did not provide a right to credit bid, no such right was required. Further, the Court noted that the secured creditors would still possess a deficiency claim and could vote against the plan as both a secured creditor and an unsecured creditor. Thus, the plan process could progress with bidding procedures that prohibited a credit bid. It is important to note that, unlike Pacific Lumber, the Third Circuit did not make a ruling on whether the bidding procedures and the plan itself actually provided the secured lenders the indubitable equivalent of their secured claims. The court only held that the plan could go forward with bidding procedures requiring only cash bids. The Third Circuit did not address whether the plan itself satisfied the cramdown requirements of section 1129(b). This issue was to be determined at confirmation. At the auction, the secured lenders actually prevailed with a defensive cash bid. One of the members of the Third Circuit panel that ruled on Philadelphia Newspapers, Judge Ambro, a former bankruptcy lawyer in Delaware, strongly dissented. In his dissent, Judge Ambro asserted that although 1129(b) is stated in the disjunctive, there was more than one reasonable reading of the statute. Looking at the legislative history and what he referred to as a longer lived interpretation of 1129(b)(2)(A), he stated that the specific language in 1129(b)(2)(A)(ii) should apply to Plan Sales and that the general indubitable equivalent language of 1129(b)(2)(A)(iii) should only apply where subsection (ii) is not applicable. While Judge Ambro s dissent may not have carried the day in the Third Circuit, Bankruptcy Judge Bruce Black of the Northern District of Illinois bankruptcy court believes it should have. In In re River Road LLC, (N.D. Ill. Oct. 5, 2010), the debtors sought to sell substantially all of their assets pursuant to a Plan Sale with bid procedures that prohibited credit 13

14 bidding. The debtors relied heavily on the Third Circuit decision in Philadelphia Newspapers, and included the same provision prohibiting credit bidding that was approved by the Third Circuit. However, Judge Black denied the bidding procedures motion and noted that he found Judge Ambro's well-reasoned dissent in Philadelphia Newspapers more persuasive. The court therefore held that the debtors could not use 1129(b)(2)(A)(iii) to sell their assets free and clear of liens, and instead must comply with the specific requirements of section 1129(b)(2)(A)(ii). 11 Conclusions/Alternatives Following the decisions described herein, secured lenders should be prepared to protect their rights to credit bid both before and after a chapter 11 filing by insisting upon proper language in credit agreements either when the debt is issued or through an amendment, and by including the rights to credit bid in cash collateral and DIP financing orders to prevent being deprived of the right under the theories espoused in Pacific Lumber and Philadelphia Newspapers. Of course, secured creditors who find themselves unable to submit a credit bid or dragged along by other creditors always have the right to resort to different approaches, like seeking the termination of exclusivity, bidding above the amount of the secured debt in a cash bid, and challenging the indubitable equivalent status of whatever they receive in a plan sale context where they were denied the right to bid. 11 The debtors also sought, in the alternative, to deny the secured lenders right to credit bid for cause. The debtors offered three arguments for why the court should find cause to deny credit bidding: (i) the lenders' actions caused the debtors to fail; (ii) allowing the lenders to credit bid would chill the bidding process; and (iii) millions of dollars in mechanics' liens were asserted and still being litigated. The court rejected all three of these arguments, finding that the debtors had offered insufficient evidence to demonstrate that cause existed. 14