## Facts

- Fisker Automotive Holdings, Inc. and affiliates filed Chapter 11 to pursue a sale of substantially all assets and then liquidate.
- Prepetition, the U.S. Department of Energy held a senior secured loan of roughly $168.5 million against the debtors.
- Hybrid Tech Holdings, LLC acquired that DOE loan position shortly before bankruptcy for $25 million at a steep discount.
- The debtors proposed a § 363 sale to Hybrid under a pre-negotiated asset purchase agreement featuring a $75 million credit bid.
- The Official Committee of Unsecured Creditors sought auction procedures and objected to an expedited, effectively prearranged sale process.
- Wanxiang America Corporation emerged as a serious competing bidder but indicated it would not participate in an auction if Hybrid could credit bid the full asserted amount of its secured claim.
- There were unresolved disputes regarding the extent and validity of Hybrid’s liens and whether certain assets were encumbered.
- The proposed sale schedule involved an extraordinarily short marketing and bidding timeline.

## Issues

1. Whether “cause” existed under 11 U.S.C. § 363(k) to limit Hybrid’s right to credit bid in a sale of substantially all assets.
2. Whether disputed lien scope/validity and a sale process likely to chill bidding justified capping the credit bid to preserve competition and maximize estate value.
3. What credit-bid limit, if any, was appropriate under the circumstances.

## Decision

- The court found “cause” under § 363(k) to limit Hybrid’s credit-bid rights.
- The court capped Hybrid’s credit bid at $25 million, the amount Hybrid paid to acquire the secured loan position.
- The court approved bidding procedures designed to permit a competitive auction in which Hybrid could still participate (by credit bid up to the cap and/or by adding cash) and in which Wanxiang could bid.
- Subsequent efforts to appeal did not result in reversal, and the auction proceeded under the capped credit-bid framework.

## Legal Principles

- Under 11 U.S.C. § 363(k), a secured creditor generally may credit bid at a § 363 sale unless the court “for cause orders otherwise.”
- “Cause” to limit credit bidding may exist where there is a bona fide dispute regarding the validity or scope of the secured creditor’s liens, particularly when a full credit bid could allow acquisition of assets not proven to be collateral without cash payment.
- “Cause” may also exist where permitting an unrestricted credit bid would chill third-party participation and prevent a meaningful, competitive auction, undermining value maximization for the estate.
- The credit-bid right is strong but not absolute; the court may condition it to balance secured-creditor protections with the estate’s interest in obtaining the highest and best value through a fair sale process.
- A credit-bid cap is a discretionary, fact-dependent remedy; the court may tailor relief to preserve bidding while limiting distortive effects of an outsized credit bid in the context of lien disputes and rushed procedures.

## Conclusion

The bankruptcy court limited a secured creditor’s § 363(k) credit bid to the amount it paid for the claim, based on disputed lien coverage and a sale process likely to deter competing bids, and approved bidding procedures aimed at enabling a competitive auction and higher value for the estate.


In re Fisker Auto. Holdings, Inc., 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014)