The issue of Lampert/ELS being about to credit bid in trying bid for the assets of Sears Holdings (SHLDQ) is a huge issue for investors in Sears 2lien and unsecured notes.
At a status conference on January 8 in bankruptcy court, Judge Drain said that Lampert could include a credit bid in his bid and that the issue of him using a credit bid would be considered during the auction to be held January 14. His comments were made after the court was informed that under an agreement with various stakeholders, the January 11 hearing to consider credit bidding was cancelled.
The key issue here is section 363(k)
“At a sale under subsection (b) of this section of property that is subject to a lien that secures an allowed claim, unless the court for cause orders otherwise the holder of such claim may bid at such sale, and, if the holder of such claim purchases such property, such holder may offset such claim against the purchase price of such property.”
Certain parties, including the Official Committee of Unsecured Creditors are contesting if Lampert’s claim should be an “allowed claim”.
Below are some assertions and interesting case citations in a filed objection to the bidding and sale procedure (docket 155) in Shoreline Energy bankruptcy case.
In re Daufuskie Island Props., LLC, 441 B.R. 60, 63–64 (Bankr. D.S.C. 2010) (citing Nat’l Bank of Commerce of El Dorado v. McMullan (In re McMullen), 196 B.R. 818, 835 (Bankr. W.D. Ark. 1996)); Morgan Stanley Dean Witter Mortgage Capital, Inc. v. Alon USA L.P. (In re Akard St. Fuels, L.P.), No. 3:01-CV1927, 2001 WL 1568332, at *3 (N.D. Tex. Dec. 4, 2001) (refusing a request to credit-bid where the secured lender’s lien was subject to a bona fide dispute that could not be resolved before the sale). A dispute is bona fide is “there is an objective basis for either a factual or legal dispute as to the validity of the debt.” In re Octagon Roofing, 123 B.R. 583, 590 (Bankr. N.D. Ill. 1991) (citing In re Busick, 831 F.2d 745, 750 (7th Cir. 1987)). “Under this standard, a court need not determine the probable outcome of the dispute, but merely whether one exists.”