Credit Bids and White Birch Paper

Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Restructuring & Insolvency, November 2010

Credit bids in relation to overleveraged businesses have become a hot topic following the economic crisis of 2008. Credit bidding is the process in which secured lenders (or their nominees) acquire assets of a business by applying their priority debt and security as a bid in kind instead of purchasing the assets by advancing funds which would flow through the estate and be distributed to the secured lenders and applied to reduce the indebtedness owed to them.

Capital structures of business have become much more complex and diverse over the last 10 years. Businesses may have numerous levels of secured debt allocated over various assets and, in some cases, there may also be assets which remain unsecured.