Glossary
Credit and risk
What is credit bid?
A secured lender buying collateral by bidding its claim instead of cash.
Protects lenders from a cheap sale; can deter cash bidders. Best run as a stalking horse with an auction behind it.
A worked example
A first lien lender owed $300m bids its claim for the assets in a section 363 sale. A cash bidder now has to beat $300m to win, so a $180m lowball offer can't take the business out from under the lender.
Where it catches you in the game
- The section 363 option in the plan negotiations room.
It comes up most on the restructuring desk.
Related terms
Learn it by using it
Definitions stick once they've cost you money. Take a seat, make three calls a year and watch what credit bid does to your returns.