Oral argument: Apr. 23, 2012
Appealed from: United States Court of Appeals for the Seventh Circuit (June 28, 2011)
RadLAX Gateway Hotel, LLC and related entities obtained a secured $142 million loan in 2007 to construct the Radisson Hotel at Los Angeles International Airport. Substantially all of RadLAX’s assets were designated as collateral for this loan. However, still saddled with $120 million of debt, RadLAX filed for bankruptcy in August 2009. RadLAX proposed a Chapter 11 reorganization plan that called for an auction sale of all its assets, free and clear of liens. The plan prohibited secured lenders from credit bidding, i.e. using their loan amounts to offset the asset prices at the auction. Amalgamated Bank, representing the lender, objected to the plan, arguing that the plan violated Section 1129(b)(2)(A)(ii) of the Bankruptcy Code. The bankruptcy court agreed and rejected RadLAX’s plan. The Seventh Circuit affirmed on appeal. The Supreme Court’s resolution of this case may affect the balance of power between debtors and secured creditors in bankruptcy proceedings.
