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O’Melveny’s Logan Quoted in International Financial Law Review on Secured Creditor Rights in Reorganizations

June 04, 2012 O’Melveny & Myers LLP partner Ben Logan is quoted in the June 1, 2012, International Financial Law Review article, “US Supreme Court affirms secured creditor rights in reorganizations.” In discussing the US Supreme Court’s decision in Radlax Gateway Hotel v. Amalgamated Bank, which “recognized the right of secured creditors to use a debtor’s outstanding balance to bid on assets free of liens during a chapter 11 section 363 sale," the article references the Third Circuit’s 2010 decision in Philadelphia Newspapers. In that case, according to the article, the Third Circuit ruled that a debtor could in fact block secured creditors from making credit bids.

“You can’t interpret the [provision] that allows for giving a secured lender the indubitable equivalent of its collateral to write-out the preceding provision that allows a secured creditor to credit bid when its collateral is being sold fee of its liens,” said Logan, who represented the undersecured creditors in Philadelphia Newspapers. “The Third Circuit’s decision was particularly significant because most companies can file bankruptcy in Delaware, which is in the Third Circuit,” he added. “In addition, secured lenders were concerned that other circuits might follow the lead of the Third Circuit.”

Logan also expressed disagreement with the view that third parties would be less likely to bid in these cases, because secured creditors are likely to bid in line what they think the collateral is worth. “What debtors were really trying to do was sell the company on the cheap [so] that it ends up in friendly hands,” he said.

Logan is a member of O'Melveny's Restructuring Practice and resides in the Firm’s Los Angeles office.