The U.S. Supreme Court upheld a lower-court ruling allowing credit bidding in bankruptcy auctions, which enables creditors to exchange their debt for property in Chapter 11 bankruptcy protection.
Before the ruling on Tuesday, there was concern among distressed debt investors that eliminating credit bidding could have made such investing more expensive.
Basing its decision largely on the current bankruptcy statutes, Justice Antonin Scalia delivered the 8-0 opinion that upheld a decision by the 7th Circuit U.S. Court of Appeals in Chicago that creditors can exchange their debt for property in Chapter 11 bankruptcy.
Justice Anthony Kennedy did not participate in the decision. No reason was given.
The case is Radlax Gateway Hotel et al vs. Amalgamated Bank.