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ARTICLE · 10 JULY 2013

Credit Bid: "This Is Not Rocket Science"

Pepper Hamilton LLP
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A discussion on a recent case involving a financing loan for the construction of a golf course.

United StatesInsolvency/Bankruptcy/Re-Structuring
Vicki Harding
Vicki Harding

Fire Eagle L.L.C. v. Bischoff (In re Spillman Dev. Group Ltd.), 710 F.3d 299 (5th Cir. 2013) –

A bank made loans to the debtor to finance construction of a golf course.  The loans were secured by senior liens on the debtor's assets, limited guaranties of its principals, and a $1.2 million certificate of deposit.  During a sale of the debtor's assets ordered by the bankruptcy court, the holder of the senior debt submitted a credit bid.  Spillman involved a dispute over the effect of the credit bid.

After the debtor filed bankruptcy, a junior lender (Fire Eagle) that had loaned the debtor $4.1 million, purchased the senior debt from the bank.  At that time, the parties stipulated that the outstanding balance of the senior loans were ~$9.1 million.

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