On March 22 the U.S. Court of Appeals for the Third Circuit ruled that secured lenders do not have a statutory right to "credit bid" their claims in connection with a sale of the debtor's assets, free and clear of the secured lender's liens, in a Chapter 11 reorganization plan.

The decision in the Philadelphia Newspapers case has far-reaching implications that upset secured creditors' long-standing expectation regarding their right to credit bid, and it probably will dramatically diminish a secured creditor's leverage to determine the course of a borrower's bankruptcy case.

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