In Re Philadelphia Newspapers, LLC

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 09-4266

IN RE: PHILADELPHIA NEWSPAPERS, LLC, ET AL.

-----------------------------

CITIZENS BANK OF PENNSYLVANIA;
STEERING GROUP OF PREPETITION
SECURED LENDERS,

Appellants

No. 09-4349

IN RE: PHILADELPHIA NEWSPAPERS, INC.,

-----------------------------

OFFICIAL COMMITTEE OF UNSECURED CREDITORS,
CITIZENS BANK OF PENNSYLVANIA;
STEERING GROUP OF PREPETITION
SECURED LENDERS,

Official Committee of Unsecured Creditors,
 Appellant

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 09-mc-00178)
District Judge: Honorable Eduardo C. Robreno

Argued December 15, 2009
Before: AMBRO, SMITH and FISHER, Circuit Judges.

(Filed: March 22, 2010)

David F. Abernethy
Andrew J. Flame
Andrew C. Kassner
Alfred W. Putnam, Jr. (Argued)
Drinker, Biddle & Reath
18th & Cherry Streets
One Logan Square
Philadelphia, PA 19103
Counsel for Appellant / Cross Appellee
Citizens Bank of Pennsylvania

Alex Freeman
Fred S. Hodara
Abid Qureshi (Argued)
Akin, Gump, Strauss, Hauer & Feld
One Bryant Park

2
New York, NY 10036

L. Rachel Helyar
Akin, Gump, Strauss, Hauer & Feld
2029 Century Park East, Suite 2400
Los Angeles, CA 90067
Counsel for Appellant / Cross Appellee
Steering Group of Prepetition Secured Lenders

Kerry A. Brennan
Rick B. Antonoff
Pillsbury, Winthrop, Shaw & Pittman
1540 Broadway, 9th Floor
New York, NY 10036

Elliot Ganz
Loan Syndications and Trading Association
366 Madison Avenue
New York, NY 10017
Counsel for Amicus Loan Syndications and
Trading Association in support of Appellants

Jonathan N. Helfat
James M. Cretella
Otterbourg, Steindler, Houston & Rosen
230 Park Avenue
New York, NY 10169

Richard M. Kohn
Ronald Barliant
Goldberg Kohn, Ltd.
55 East Monroe Street, Suite 3300

3
Chicago, IL 60603
Counsel for Amicus Commercial Finance
Association in Support of Appellants

Ann M. Aaronson
Lawrence G. McMichael (Argued)
Dilworth Paxson
1500 Market Street, Suite 2500E
Philadelphia, PA 19102
Counsel for Appellees
Philadelphia Newspapers, LLC, et al.

Ronald S. Gellert
Brya M. Keilson
Gary M. Schildhorn
Eckert, Seamans, Cherin & Mellott
50 South 16th Street
Two Liberty Place, 22nd Floor
Philadelphia, PA 19102

Ben H. Logan, III (Argued)
O'Melveny & Myers
400 South Hope Street, 15th Floor
Los Angeles, CA 90071
Counsel for Appellee / Cross Appellant
Official Committee of Unsecured Creditors

OPINION

FISHER, Circuit Judge.

4
 We are asked in this appeal to decide whether Section
1129(b)(2)(A) of the Bankruptcy Code requires that any debtor
who proposes, as part of its plan of reorganization, a sale of
assets free of liens must allow creditors whose loans are secured
by those assets to bid their credit at the auction. Because
subsection (iii) of Section 1129(b)(2)(A) unambiguously permits
a debtor to proceed with any plan that provides secured lenders
with the “indubitable equivalent” of their secured interest in the
assets and contains no statutory right to credit bidding, we will
affirm the District Court’s approval of the proposed bid
procedures.

I.

Philadelphia Newspapers, LLC (the “Debtors1”) own and
operate the print newspapers the Philadelphia Inquirer and
Philadelphia Daily News and the online publication philly.com.
The Debtors acquired these assets in July 2006 for $515 million
as part of an acquisition of the businesses by an investor group
led by Philadelphia PR executive, Brian Tierney. $295 million
of this purchase price came from a consortium of lenders who
are collectively the appellants in this action (the “Lenders”).2

1
The Debtors include PMH Acquisition, LLC; Broad
Street Video, LLC; Philadelphia Newspapers, LLC;
Philadelphia Direct, LLC; Philly Online, LLC; PMH Holdings,
LLC; Broad Street Publishing, LLC; and Philadelphia Media,
LLC. PMH is the parent company of all other debtors.
2
The parties to this appeal are the Steering Group of
Prepetition Secured Lenders, Citizens Bank of Pennsylvania as

5
This loan was made pursuant to a Credit and Guaranty
Agreement dated June 29, 2006, between the Lenders and the
Debtors (the “Loan Agreement”). The Loan Agreement and
other loan documents provide that the Lenders hold first priority
liens in substantially all of the Debtors’ real and personal
property. The present value of the loan is approximately $318
million.

The Debtors were in default under covenants in the Loan
Agreement as of December 31, 2007, and defaulted on a loan
payment in September 2008. All of the Debtors besides PMH
Holdings filed voluntary petitions under Chapter 11 of the
Bankruptcy Code on February 22, 2009. PMH Holdings, the
parent company, filed in June 2009. Currently, the Debtors
control their businesses and property as debtors in possession.

On August 20, 2009, the Debtors filed a joint Chapter 11
plan of reorganization (the “Plan”). The Plan provides that
substantially all of the Debtors’ assets will be sold at a public
auction and that the assets would transfer free of liens. Debtors
simultaneously signed an asset purchase agreement with Philly
Papers, LLC (the “Stalking Horse Bidder”). A majority interest
in the Stalking Horse Bidder is held by the Carpenters Pension
and Annuity Fund of Philadelphia and Vicinity (“Carpenters”)
and Bruce Toll. The Carpenters own approximately 30% of the
equity in debtor PMH Holdings, LLC and Toll owned
approximately 20% of the equity in PMH Holdings, LLC until
the day before the asset purchase agreement was signed.

their agent, and the Official Committee of Unsecured Creditors.

6
 Under the Plan, the purchase will generate approximately
$37 million in cash for the Lenders. Additionally, the Lenders
will receive the Debtors’ Philadelphia headquarters which the
Debtors have valued at $29.5 million, subject to a two-year rent
free lease for the entity that will operate the newspapers. The
Lenders would receive any cash that is generated by a higher bid
at the public auction.3

The Debtors filed a motion for approval of bid
procedures on August 28, 2009. As part of the motion, the
Debtors sought to preclude the Lenders from “credit bidding”
for the assets.4 Instead, the Debtors insisted that any qualified
bidder fund its purchase with cash. In their motion to the Court,
Debtors stated the basis for their procedures:

3
The plan also establishes a $750,000 to $1.2 million
liquidating trust fund in favor of general unsecured trade
creditors and provides for a distribution of 3% ownership in the
successful purchaser to other general unsecured creditors if the
senior lenders waive their deficiency claims. Only the plan
treatment of secured lenders is the subject of this appeal, though
unsecured lenders assert that they have an interest in the
treatment of secured lenders under the Plan because the Lenders
have agreed to waive deficiency claims if they are permitted to
credit bid. (Official Committee of Unsecured Creditor’s
Opening Br. 23.)
4
A credit bid allows a secured lender to bid its debt in lieu
of cash.

7
 The Plan sale is being conducted under section
1123(a) and (b) of the Bankruptcy Code, and not
section 363 of the Bankruptcy Code. As such, no
holder of a lien on any asset of the Debtors shall
be permitted to credit bid pursuant to section
363(k) of the Bankruptcy Code.

(App. 1291.) Objections to the motion were filed by the
Lenders, the Creditors’ Committee, the Office of the United
States Trustee, the Pension Benefit Guaranty Corporations, and
other creditors and debtor pension plans.

On October 8, 2009, the Bankruptcy Court issued an
order refusing to bar the lenders from credit bidding. In re
Philadelphia Newspapers, LLC, No. 09-11204, slip op. (Bankr.
E.D. Pa. Oct. 8, 2009). The Court reasoned that while the Plan
proceeded under the “indubitable equivalent” prong of
§ 1129(b)(2)(A)(iii), it was structured as a § 1129(b)(2)(A)(ii)
plan sale in every respect other than credit bidding. Reading
§ 1129(b)(2)(A) in light of other provisions of the Code –
specifically §§ 363(k) and 1111(b) – the Court determined that
any sale of the Debtors’ assets required that a secured lender be
able to participate in a sale by credit bidding its debt.

The Bankruptcy Court then approved a revised set of bid
procedures without the ban on credit bidding on October 15,
2009. The revised bid procedures specifically allowed the
Lenders to bid their secured debt up to $318,763,725. The
Bankruptcy Court’s ruling was appealed to the District Court.

8
 On November 10, 2009, the District Court reversed the
Bankruptcy Court. In re Philadelphia Newspapers, LLC, No.
09-mc-178, slip op. (E.D. Pa. Nov. 10, 2009) [hereinafter Dist.
Ct. slip op.]. It disagreed with the Bankruptcy Court’s
interpretation of § 1129(b)(2)(A) and held that the Code
provides no legal entitlement for secured lenders to credit bid at
an auction sale pursuant to a reorganization plan.

The District Court relied on the plain language of
§ 1129(b)(2)(A), which provides three distinct routes to plan
confirmation – retention of liens and deferred cash payments
under subsection (i), a free and clear sale of assets subject to
credit bidding under subsection (ii), or provision of the
“indubitable equivalent” of the secured interest under subsection
(iii). The Court reasoned that these three routes were
independent prongs, separated by the disjunctive “or,” and
therefore each was sufficient for confirmation of a plan as “fair
and equitable” under the Code. Because the right to credit bid
was not incorporated into subsection (iii), as it was in subsection
(ii), Congress did not intend that a debtor who proceeded under
the third prong would be required to permit credit bidding.
Instead, subsection (iii) required only that a debtor provide
secured lenders with the “indubitable equivalent” of their
secured interest in the assets. The District Court pointed out that
this broad language served as an “invitation to debtors to craft
an appropriate treatment of a secured creditor’s claim, separate
and apart from the provisions of subsection (ii).” Dist. Ct. slip
op. at 39. As such, “a plan sale is potentially another means to
satisfy this indubitable equivalent standard.” Id. at 39-40.

9
 The District Court’s order was appealed to us along with
a motion for a stay. We granted the stay on November 17, 2009,
pending resolution of this appeal on the merits.

II.

The District Court had jurisdiction under 28 U.S.C.
§ 158(a)(3) over the appeal from the Bankruptcy Court,5 which
had jurisdiction under 28 U.S.C. § 157(b). We have jurisdiction
under 28 U.S.C. § 158(d).

We exercise plenary review over the District Court’s
conclusions of law, including matters of statutory interpretation.
In re Tower Air, Inc., 397 F.3d 191, 195 (3d Cir. 2005) (citing
In re Prof’l Ins. Mgmt., 285 F.3d 268, 282-83 (3d Cir. 2002)).
Because the District Court sat as an appellate court to review the
Bankruptcy Court’s ruling, we review the Bankruptcy Court’s
legal determinations de novo, its factual findings for clear error,
and its exercises of discretion for abuse thereof. Id. (citing In re
Engel, 124 F.3d 567, 571 (3d Cir. 1997)).

III.

Chapter 11 of the Bankruptcy Code strikes a balance
between two principal interests: facilitating the reorganization

5
The District Court construed the filing of the appeal as
an appropriate motion for leave to appeal pursuant to Fed. R.
Bankr. P. 8003(c). This vested the District Court with
jurisdiction over the interlocutory order. See Dist. Ct. slip op.
at 11-13.

10
and rehabilitation of the debtor as an economically viable entity,
and protecting creditors’ interests by maximizing the value of
the bankruptcy estate. See In re Integrated Telecom Express,
Inc., 384 F.3d 108, 119 (3d Cir. 2004) (citing Bank of Am. Nat’l
Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434,
453 (1999)). In furtherance of those objectives, the Code
permits a debtor preparing a Chapter 11 reorganization plan to
“provide adequate means for the plan’s implementation”
including arranging for the “sale of all or any part of the
property of the estate, either subject to or free of any lien[.]” 11
U.S.C. § 1123(a)(5)(D). We are asked in this appeal to
determine what rights a secured lender has when its collateral is
sold pursuant to § 1123(a)(5)(D).

As a starting point for our analysis, we note that the “plan
sale” authorized by § 1123(a)(5)(D) contains no explicit
procedures for the sale of assets that secure debts of the estate.
Lacking direct authority, we look to the plan confirmation
provision of the Code, § 1129(b), to determine what
requirements the court will later have to find are satisfied in
order to confirm the plan, including the asset sale. The meaning
of § 1129(b), and what rights it confers on secured lenders as a
matter of law, is thus the central question in this appeal.
Because § 1129(b) unambiguously permits a court to confirm a
reorganization plan so long as secured lenders are provided the
“indubitable equivalent” of their secured interest, we will affirm
the District Court.

The Lenders offer three principal arguments in support of
their right to credit bid at the auction of the assets securing their
loan: First, they contend that the plain language of

11
§ 1129(b)(2)(A), in light of applicable canons of statutory
interpretation, requires that all sales of assets free and clear of
liens must proceed under subsection (ii) of that provision, which
includes the right to credit bid. Second, they argue that
subsection (iii) calling for the “indubitable equivalent” of a
lender’s secured interest is ambiguous, requiring resort to other
provisions of the Code that purportedly confirm the Lenders’
right to credit bid. Finally, they argue that denying secured
lenders a right to credit bid is inconsistent with other provisions
of the Bankruptcy Code. We will address each argument in
turn.

A. The Plain Meaning of Section 1129(b)(2)(A) Permits
a Debtor to Conduct an Asset Sale Under Subsection
(iii) Without Allowing Secured Lenders to Credit Bid

It is the cardinal canon of statutory interpretation that a
court must begin with the statutory language. “[C]ourts must
presume that a legislature says in a statute what it means and
means in a statute what it says there. When the words of a
statute are unambiguous, then this first canon is also the last:
judicial inquiry is complete.” Conn. Nat’l Bank v. Germain, 503
U.S. 249, 253-54 (1992) (internal citations and quotations
omitted); see also Price v. Del. State Police Fed. Credit Union,
370 F.3d 362, 368 (3d Cir. 2004) (“We are to begin with the text
of a provision and, if its meaning is clear, end there.”). Where
the statutory language is unambiguous, the court should not
consider statutory purpose or legislative history. See AT&T, Inc.
v. F.C.C., 582 F.3d 490, 498 (3d Cir. 2009).

12
 In determining whether language is unambiguous, we
“read the statute in its ordinary and natural sense.” Harvard
Secured Creditors Liquidation Trust v. I.R.S., 568 F.3d 444, 451
(3d Cir. 2009). A provision is ambiguous only where the
disputed language is “reasonably susceptible of different
interpretations.” Dobrek v. Phelan, 419 F.3d 259, 264 (3d Cir.
2005) (quoting Nat’l R.R. Passenger Corp. v. Atchinson Topeka
& Santa Fe Ry. Co., 470 U.S. 451, 473 n.27 (1985)).

With that framework in mind, we turn to the language of
§ 1129(b)(2)(A). Section 1129(b) provides circumstances under
which a reorganization plan can be confirmed over the objection
of secured creditors – a process referred to as a “cramdown”
because the secured claims are reduced to the present value of
the collateral, while the remainder of the debt becomes
unsecured, forcing the secured creditor to accept less than the
full value of its claim and thereby allowing the plan to be
“crammed down the throats of objecting creditors.” Kham &
Nate’s Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d
1351, 1359 (7th Cir. 1990) (Easterbrook, J.). Section 1129(b)(1)
requires the court to assess whether the proposed treatment of
the secured claims is “fair and equitable.” 11 U.S.C.
§ 1129(b)(1).

Section 1129(b)(2)(A) provides three circumstances
under which a plan is “fair and equitable” to secured creditors:

(A) With respect to a class of secured claims,
the plan provides--

13
(i) (I) that the holders of such claims
retain the liens securing such
claims, whether the property
subject to such liens is retained by
the debtor or transferred to another
entity, to the extent of the allowed
amount of such claims; and (II) that
each holder of a claim of such class
receive on account of such claim
deferred cash payments totaling at
least the allowed amount of such
claim, of a value, as of the effective
date of the plan, of at least the
value of such holder’s interest in
the estate’s interest in such
property.

(ii) for the sale, subject to section
363(k) of this title, of any property
that is subject to the liens securing
such claims, free and clear of such
liens, with such liens to attach to
the proceeds of such sale, and the
treatment of such liens on proceeds
under clause (i) or (iii) of this
subparagraph; or

(iii) for the realization by the holders of
the indubitable equivalent of such
claims.

14
11 U.S.C. § 1129(b)(2)(A)(i)-(iii) (emphasis added).

The three subsections of § 1129(b)(2)(A) each propose
means of satisfying a lender’s lien against assets of the
bankruptcy estate. Subsection (i) provides for the transfer of
assets with the liens intact and deferred cash payments equal to
the present value of the lender’s secured interest in the
collateral. Subsection (ii) provides for the sale of the collateral
that secures a lender free and clear of liens so long as the lender
has the opportunity to “credit bid” at the sale (i.e., offset its bid
with the value of its secured interest in the collateral) with the
liens to attach to the proceeds of the sale.6 Subsection (iii)
provides for the realization of the claim by any means that
provides the lender with the “indubitable equivalent” of its
claim.

6
The right to credit bid is found in § 363(k) and explicitly
incorporated into subsection (ii). Section 363(k) provides:

At a sale under subsection (b) of this section of
property that is subject to a lien that secures an
allowed claim, unless the court for cause orders
otherwise the holder of such claim may bid at
such sale, and, if the holder of such claim
purchases such property, such holder may offset
such claim against the purchase price of such
property.

11 U.S.C. § 363(k).

15
 The Lenders concede, as they must, that § 1129(b)(2)(A)
is phrased in the disjunctive. The use of the word “or” in this
provision operates to provide alternatives – a debtor may
proceed under subsection (i), (ii), or (iii), and need not satisfy
more than one subsection. This approach is consistent with the
definitions provided by the Code. Section 102(5) provides that
‘or’ is not exclusive[.]” 11 U.S.C. § 102(5). The statutory note
to § 102(5) further explains that “if a party ‘may do (a) or (b)’,
then the party may do either or both. The party is not limited to
a mutually exclusive choice between the two alternatives.” 11
U.S.C. § 102 hist. n. (West 2004) (Revision Notes and
Legislative Reports); see also H.R. Rep. No. 95-595, at 315
(1977) as reprinted in 1978 U.S.C.C.A.N. 5963, 6272; S.Rep.
No. 95-989, at 28 (1978) as reprinted in 1978 U.S.C.C.A.N.
5787, 5814. Thus, any doubt as to whether subsections (i), (ii),
and (iii) were meant to be alternative paths to meeting the fair
and equitable test of § 1129(b)(2)(A) is resolved by the
Bankruptcy Code itself, and courts have followed this
uncontroversial mandate. See, e.g., Pacific Lumber, 584 F.3d at
245 (affirming “the obvious proposition that because the three
subsections of § 1129(b)(2)(A) are joined by the disjunctive
‘or,’ they are alternatives”); Wade v. Bradford, 39 F.3d 1126,
1130 (10th Cir. 1994) (“These requirements [of
§ 1129(b)(2)(A)] are written in the disjunctive, requiring the
plan to satisfy only one before it could be confirmed over
creditor’s objection.”); In re Brisco Enters., Ltd. II, 994 F.2d
1160, 1168 (5th Cir. 1993) (holding that the court “has not
transformed the ‘or’ in 1129(b)(2)(A) to an ‘and’”); accord
Corestates Bank, N.A. v. United Chem. Techs., Inc., 202 B.R.
33, 50 (E.D. Pa. 1996) (“Courts consider Congresses’ use of the
disjunctive ‘or’ between subsections (i), (ii), and (iii) indicative

16
of Congressional intent that only one of the three subsections
need be satisfied in order to find a plan fair and equitable.”).

Though the ordinary operation of the word “or” is not
genuinely disputed among the parties,7 the Lenders rely on a
traditional canon of statutory interpretation – that the specific
term prevails over the general term – to argue that a plan sale of

7
We do note, with some confusion, our dissenting
colleague’s discussion of the “exclusive” nature of “or” under
certain circumstances. See Dissent op. Part II.B. We readily
concede that there are circumstances where the enumerated
options, though separated by “or,” necessarily preclude the
selection of both – such as where a statute calls for distinct
treatments “before” or “after” a specified event. See, e.g., 11
U.S.C. § 365(g)(2)(B)(i)-(ii). We also agree that a list of three
options, separated by “or,” creates a type of exclusivity in that
it does not permit the selection of a fourth non-enumerated
option. See, e.g., Williams v. Tower Loan of Miss., Inc. (In re
Williams), 168 F.3d 845, 847-48 (5th Cir. 1999) (holding that
where Congress has provided three permissible treatments of
secured claims under 11 U.S.C. § 1325(a)(5) the parties may not
construct a fourth extra-statutory option). None of these
observations, however, inform our analysis here. Section
1129(b)(2)(A) provides three treatments of secured claims, none
of which facially preclude the selection of any one treatment (as
in the case of a statute addressing “before” and “after”). The
Debtors here seek to elect one of those enumerated treatments,
subsection (iii), not invent a fourth option not intended by
Congress. We thus fail to see how an “exclusive” reading of
“or” aids the Lenders’ position in this case.

17
assets free and clear of liens must comply with the more specific
requirements of subsection (ii). In other words, the proposed
treatment of collateral determines which of the § 1129(b)(2)(A)
alternatives is applicable. Under this interpretation, any Chapter
11 plan proposing the transfer of assets encumbered by their
original liens must proceed under subsection (i), any plan
proposing the free and clear sale of assets must proceed under
subsection (ii), and only those plans proposing a disposition not
covered by subsections (i) and (ii), most notably the substitution
of collateral, may then proceed under subsection (iii). This
reasoning dictates that, because the Plan includes a sale of
collateral free and clear of liens, the Lenders would have a
statutory right to credit bid pursuant to the express terms of
subsection (ii).

It is “a well-settled maxim that specific statutory
provisions prevail over more general provisions.” In re
Combustion Eng’g, 391 F.3d 190, 237 n.49 (3d Cir. 2004). In
Combustion Engineering, we applied this principle to hold that
the broad equitable authority granted to bankruptcy courts by
§ 105(a) to issue “any order, process, or judgment that is
necessary or appropriate to carry out the provisions of this title,”
11 U.S.C. § 105(a), could not be used to circumvent the express
limitations of § 524(g), which enumerated limited circumstances
under which the court could enjoin suits against non-debtors
whose asbestos liabilities were derivative of the debtor’s, 11
U.S.C. § 524(g)(4)(a)(ii). Accordingly, we vacated an
injunction precluding suit against non-debtors whose liabilities
did not fall within those articulated in § 524(g), notwithstanding
the court’s more general equitable authority under § 105(a).

18
 However, the Supreme Court has cautioned that “[t]o
apply a canon properly one must understand its rationale.”
Varity Corp. v. Howe, 516 U.S. 489, 511 (1996). The principle
motivating the outcome in Combustion Engineering was “a
warning against applying a general provision when doing so
would undermine limitations created by a more specific
provision.” 391 F.3d at 237 n.49 (quoting Varity Corp., 516
U.S. at 511) (emphasis added). Thus, the principle is only
applicable here if we find that the specificity of subsection (ii)
operates as a limitation on the broader language in subsection
(iii). We believe it does not.

The Supreme Court has addressed a nearly identical
argument, albeit under a different statutory scheme, and held
that a specific enumeration followed by a broader “catchall”
provision does not require application of the more specific
provision. Varity Corp., 516 U.S. at 511-12. The question in
Varity Corp. was whether § 502(a)(3) of ERISA authorized
individual relief when plan beneficiaries sued for breach of
fiduciary duty. ERISA’s remedial provision provides, in
relevant part:

Sec. 502. (a) A civil action may be brought- . . .

(2) by the Secretary, or by a participant,
beneficiary or fiduciary for appropriate relief
under section 1109 of this title; [or]

(3) by a participant, beneficiary, or fiduciary (A)
to enjoin any act or practice which violates any
provision of this subchapter or the terms of the

19
 plan, or (B) to obtain other appropriate equitable
relief (i) to redress such violations or (ii) to
enforce any provisions of this subchapter or the
terms of the plan[.]

29 U.S.C. § 1132(a). Section 1109, describing the relief
available under subsection (2), is titled “Liability for Breach of
Fiduciary Duty” and provides that any individual who breaches
a fiduciary duty is personally liable to “make good to such plan
any losses to the plan.” 29 U.S.C. § 1109(a). Prior Supreme
Court analysis made clear that this language limited relief to
restitution to the plan, and thereby precluded individual relief
under § 1109(a). See Mass. Mut. Life Ins. Co. v. Russell, 473
U.S. 134, 144 (1985). Plaintiffs, as participants and
beneficiaries of the plan, sued Varity under subsection (3)
alleging breach of fiduciary duty and seeking individual
equitable relief.

The argument advanced by Varity mirrored the argument
advanced by the Lenders here: Varity argued that, because
subsection (2) specifically pertains to breaches of fiduciary duty,
and because it incorporates the § 1109(a) prohibition on
individual recovery, the plaintiffs could not avail themselves of
the more general subsection (3) when their suit was premised on
breach of fiduciary duty. To permit as much, Varity argued,
was to allow a circumvention of subsection (2)’s restrictions on
individual relief.

The Supreme Court rejected this argument. Considering
the application of the canon “the specific governs the general,”
the Court reasoned that it only applied where the more specific

20
provision clearly placed a limitation on the general. 516 U.S. at
511. The Court observed no such limitation in the narrower
provision of subsection (2):

To the contrary, one can read [§1109] as
reflecting a special congressional concern about
plan asset management without also finding that
Congress intended that section to contain the
exclusive set of remedies for every kind of
fiduciary breach. . . . Why should we not
conclude that Congress provided yet other
remedies for yet other breaches of other sorts of
fiduciary obligations in another, “catchall”
remedial section?

Id. at 511-12. The plaintiffs were thus permitted to proceed
under subsection (3) and seek individual equitable relief for the
alleged breach of fiduciary duty.

The Court’s reasoning in Varity Corp. helps to resolve
our inquiry into the relationship between the subsections of
§ 1129(b)(2)(A). Although subsection (ii) specifically refers to
a “sale” and incorporates a credit bid right under § 363(k), we
have no statutory basis to conclude that it is the only provision
under which a debtor may propose to sell its assets free and
clear of liens. While the proposed disposition of assets in
subsection (ii) may reflect “a special congressional concern”
about the free and clear transfer of collateral that secures a loan,
Varity Corp., 516 U.S. at 511, this does not lead inexorably to
the conclusion that Congress meant for subsection (ii) to be the
exclusive means through which such collateral is transferred.

21
Just as the Court in Varity Corp. concluded that the “catchall”
provision permitted “yet other remedies for yet other breaches
of other sorts of fiduciary obligations,” 516 U.S. at 512, it is
apparent here that Congress’ inclusion of the indubitable
equivalence prong intentionally left open the potential for yet
other methods of conducting asset sales, so long as those
methods sufficiently protected the secured creditor’s interests.
Accord In re CRIIMI MAE, Inc., 251 B.R. 796, 807 (Bankr. D.
Md. 2000) (“11 U.S.C. § 1129(b)(2)(A) plainly indicates that
subsections (i), (ii) and (iii) are to be treated as distinct
alternatives. As a result, the provisions are not in conflict and
the [‘specific governs the general’] rule of construction is
inapplicable.”).8

8
The Court’s reasoning in Varity Corp. also makes
abundantly clear that application of a broader provision, which
the court self-terms a “catchall,” 516 U.S. at 512, does not
automatically render narrower provisions superfluous. Such
would only be the case where the narrower provision facially
precludes application of that broader provision. Though our
dissenting colleague would hold otherwise, permitting a sale of
assets under subsection (iii) is not “contrary to the express
terms” of subsection (ii), dissent op. Part III.A.2. Subsection (ii)
provides a specific, though non-exclusive, route to a “fair and
equitable” plan of reorganization. Subsection (iii) provides a
more open-ended directive towards the same goal. The
selection of one option does not facially negate the other (as in
the case of provisions directing conduct “before” or “after,”see
supra note 7). Rather, the dissent suggests that the proposed
plan in this case – a free and clear sale of assets under the
“indubitable equivalent” prong – will have the effect of denying

22
 The Lenders’ argument in this regard elevates form over
substance. A proposed plan of reorganization, even one that
fully compensates lenders for their secured interest, would
necessarily fail under their reading if the plan proposed a free
and clear asset sale without complying with the additional
requirements of subsection (ii). Reading the statute in this
manner significantly curtails the ways in which a debtor can
fund its reorganization – an outcome at odds with the
fundamental function of the asset sale, to permit debtors to
“provide adequate means for the plan’s implementation.” 11
U.S.C. § 1123(a)(5)(D); see also Varity Corp., 516 U.S. at 513
(rejecting a limited reading of the “catchall” provision because
“ERISA’s basic purposes favor a reading of the third subsection
that provides the plaintiffs with a remedy”).

secured creditors the established “fair and equitable” treatment
of subsection (ii), thus demonstrating statutory conflict. This
argument is not directed at the statute; it is directed at the
ultimate outcome. The question of whether a particular asset
sale is “fair and equitable” is a question for plan confirmation
and cannot be answered at this stage by manufacturing extra-
textual statutory constraints. See Pacific Lumber, 584 F.3d at
246 (“Clause (iii) does not render Clause (ii) superfluous
facially or as applied to the MRC/Marathon plan. Although a
credit bid option might render Clause (ii) imperative in some
cases, it is unnecessary here because the plan offered a cash
payment to the Noteholders. Clause (iii) thus affords a distinct
basis for confirming a plan if it offered the Noteholders the
‘realization . . . of the indubitable equivalent of such claims.’”).

23
 The Fifth Circuit in Pacific Lumber, 584 F.3d 229,
reached this same conclusion. The transaction in Pacific
Lumber was an inside transfer of assets to the reorganized
entities, free and clear of the liens, which the Fifth Circuit
determined was a sale under the Code. Id. at 245. In exchange,
the secured lenders received the full cash equivalent of their
undersecured claims but were not permitted to bid their credit to
attain possession of the assets. The secured lenders objected to
the confirmation of the plan based on their inability to credit bid.

In analyzing the confirmation, the Fifth Circuit required
the creditors to “do more than show that Clause (ii) theoretically
applied to this transaction. They have to demonstrate its
exclusive applicability.” Id. The court reasoned that the
creditors could not demonstrate the exclusive application of
subsection (ii) because the three subsections of § 1129(b)(2)(A)
were “alternatives” and “not even exhaustive” of the ways in
which a debtor might satisfy the “fair and equitable”
requirement. Id. Thus, even though the debtors’ proposed asset
transfer was a “sale” under the Code, the court did not limit the
debtors to confirmation under subsection (ii). Id. at 245-46.
Rather, the court looked to whether the transaction satisfied the
requirements of subsection (iii). Id. at 246. Because the
proposed cash payout of the value of the collateral provided the
secured lenders with the “indubitable equivalent” of their
claims, the plan was confirmable under subsection (iii)
notwithstanding its structure as an asset sale and the exclusion
of the secured lenders’ right to credit bid. Id. at 246-47.

The court’s approach in Pacific Lumber focuses on
fairness to the creditors over the structure of the cramdown.

24
Under the scheme proposed by the Lenders, because the Pacific
Lumber plan involved a sale of assets, the debtor would be
required to proceed under subsection (ii); and, if it could not
meet the subsection (ii) requirements, then the plan could not be
confirmed. The Fifth Circuit instead took the more flexible
approach, consistent with the disjunctive nature of the statute,
that a plan could be confirmed so long as it met any one of the
three subsections’ requirements, regardless of whether the plan’s
structure more closely resembled another subsection. Id.;
accord Corestates Bank, 202 B.R. at 50 (holding that a plan
permitting retention of liens on some but not all collateral could
not proceed under subsection (i) and remanding for
consideration of whether the plan provided the indubitable
equivalent under subsection (iii)); CRIIMI MAE, 251 B.R. at
806 (rejecting argument that “no plan that contemplates the sale
of collateral of a dissenting class of secured claims can be found
‘fair and equitable’ unless it complies with section
1129(b)(2)(A)(ii)”).

This approach recognizes that Congress’ use of “or” in
§ 1129(b)(2)(A) was not without purpose. A plan of
reorganization cannot be confirmed over the objection of
secured lenders unless it is “fair and equitable.” 11 U.S.C.
§ 1129(b)(1). To guide courts in interpreting that standard,
Congress provided examples: a transfer of lien-encumbered
assets with deferred cash payments, a free and clear sale of
assets subject to credit bidding, or any other disposition that
provides lenders with the “indubitable equivalent” of their
secured interest. The final option elevates fair return to the
lenders over the methodology the debtor selects to achieve that
return, and invites debtors “to craft an appropriate treatment of

25
a secured creditor’s claim, separate and apart from the
provisions of subsection (ii).” Dist. Ct. slip op. at 39. We have
no statutory basis for concluding that such flexibility, consistent
with both the language and purpose of the Code, should be
curtailed.

B. Subsection (iii)’s “Indubitable Equivalent” Language
Unambiguously Excludes the Right to Credit Bid

Next, the Lenders argue that the term “indubitable
equivalent” is ambiguously broad and we should therefore resort
to other canons of statutory construction to determine whether
a sale of collateral in the absence of credit bidding can ever
provide the “indubitable equivalent” of the secured interest.

The term “indubitable equivalent,” while infrequently
employed in popular parlance, was not plucked from the
congressional ether. Judge Learned Hand first coined the phrase
“indubitable equivalent” in his opinion In re Murel Holding
Corp., 75 F.2d 941, 942 (2d Cir. 1935). In that opinion, Judge
Hand rejected a debtor’s offer to repay the balance of a secured
debt in a balloon payment ten years after plan confirmation with
interim interest payments but no requirements to protect the
collateral. Judge Hand reasoned that, under the Bankruptcy Act
of 1898, a secured creditor could not be deprived of his
collateral “unless by a substitute of the most indubitable
equivalence.” Id. This phrase was later added to the
Bankruptcy Code. The phrase, as the Fifth Circuit noted, is
“rarely explained in caselaw, because most contested
reorganization plans follow familiar paths outlined in Clauses (i)
and (ii).” Pacific Lumber, 584 F.3d at 246.

26
 As a general matter of statutory construction, a term in a
statute is not ambiguous merely because it is broad in scope.
See Penn. Dep’t of Corrections v. Yeskey, 524 U.S. 206, 212
(1998). In employing intentionally broad language, Congress
avoids the necessity of spelling out in advance every
contingency to which a statute could apply. See Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 499 (1985) (holding that
the fact that a statute can be “applied in situations not expressly
anticipated by Congress does not demonstrate ambiguity. It
demonstrates breadth.”).

Though broad, the phrase “indubitable equivalent” is not
unclear. Indubitable means “not open to question or doubt,”
Webster’s Third New Int’l Dictionary 1154 (1971), while
equivalent means one that is “equal in force or amount” or
“equal in value,” id. at 769. The Code fixes the relevant “value”
as that of the collateral. See 11 U.S.C. § 1129(b)(2)(A)(iii)
(requiring the “indubitable equivalent” of the secured claim); id.
§ 506(a) (defining a secured claim as “the extent of the value of
such creditor’s interest in the estate’s interest in such property”).
Thus the “indubitable equivalent” under subsection (iii) is the
unquestionable value of a lender’s secured interest in the
collateral.

Further, the scope of the “indubitable equivalent” prong
is circumscribed by the same principles that underlie subsections
(i) and (ii), specifically, the protection of a fair return to secured
lenders.9 As the Fifth Circuit reasoned:

9
The dissent misunderstands this point. See Dissent op.
Part III.A.1. Subsections (i) and (ii) do not, as noted supra,

27
 Congress did not adopt indubitable equivalent as
a capacious but empty semantic vessel. Quite the
contrary, these examples focus on what is really
at stake in secured credit: repayment of principal
and the time value of money. Clauses (i) and (ii)
explicitly protect repayment to the extent of the
secured creditors’ collateral value and the time
value compensating for the risk and delay of
repayment. Indubitable equivalent is therefore no
less demanding a standard than its companions.

Pacific Lumber, 584 F.3d at 246.

Applying this standard, courts have concluded in a
variety of circumstances that a debtor has provided the
“indubitable equivalent” of a secured lender’s claim. See id. at
246 (holding a cash payout satisfied the “indubitable equivalent”
prong); In re Sun Country, 764 F.2d 406, 409 (5th Cir. 1985)
(holding 21 notes secured by 21 lots of land was the
“indubitable equivalent” of a first lien on a 200 acre lot); accord
CRIIMI MAE, 251 B.R. at 807-08 (holding exchange of
collateral satisfied the “indubitable equivalent” prong); see also
Kenneth N. Klee, All You Ever Wanted to Know About Cram
Down under the Bankruptcy Code, 53 Am. Bankr. L.J. 133, 156
(1979) (hypothesizing that “[a]bandonment of the collateral to
the class would satisfy [indubitable equivalent], as would a
replacement lien on similar collateral”).

operate as limitations on subsection (iii). Rather, the
requirement that the disposition of assets is “fair and equitable”
to secured lenders acts as an equal limitation on all subsections.

28
 Because we decline to hold that subsection (iii) is
ambiguous, the Lenders may only assert a right to credit bid
under subsection (iii) if that right is contained in the plain
language of the statute. Section 1129(b)(2)(A)(iii) states that a
plan of reorganization is fair and equitable if it provides “for the
realization by the holders of the indubitable equivalent of
[allowed secured] claims.” Subsection (iii), unlike subsection
(ii), incorporates no reference to the right to credit bid created in
§ 363(k). A plain reading of § 1129(b)(2)(A)(iii) therefore
compels the conclusion that, when a debtor proceeds under
subsection (iii), Congress has provided secured lenders with no
right to credit bid at a sale of the collateral.

The Lenders counter this conclusion by arguing that,
even if subsection (iii) contains no explicit right to credit bid,
that right is necessary to providing secured lenders with the
“indubitable equivalent” of their claims. This argument is
premised on our decision in In re SubMicron Systems Corp., 432
F.3d 448 (3d Cir. 2006), where we held that credit bidders in a
§ 363(b) sale could bid up to the full value of their loan, and that
the amount of the credit bid became the value of the lender’s
secured interest in the collateral. In light of SubMicron, the
Lenders ask us to hold that a secured lender who is not allowed
to credit bid can never receive the “indubitable equivalent” of its
secured interest because its credit bid sets the value of the
collateral.

The Lenders’ argument is well-taken that determining
whether a secured lender has received the full value of its
interest in the collateral is more complicated when the collateral
undersecures the debt. To illustrate the distinction: A lender

29
who makes a loan of $100 secured by a lien against a truck
worth $500 indisputably has a secured interest of $100. If the
value of the truck depreciates such that, at the time of
bankruptcy, the truck is worth less than $100, then the lender
has a secured interest only up to the “value” of the truck. The
source of this “value” is central to this dispute to the extent that
it informs whether a lender has received the indubitable
equivalent of its secured interest.

SubMicron is consistent with our analysis in this case.
Our holding that a credit bid sets the value of a lender’s secured
interest in collateral does not equate to a holding that a credit bid
must be the successful bid at a public auction. Rather, a court
is called at plan confirmation to determine only whether a lender
has received the “indubitable equivalent” of its secured interest.
Logically, this can include not only the cash value generated by
the public auction, but other forms of compensation or security
such as substituted collateral or, as here, real property. In other
words, it is the plan of reorganization, and not the auction itself,
that must generate the “indubitable equivalent.” For this reason,
the District Court noted that Lenders “retain the right to argue
at confirmation, if appropriate, that the restriction on credit
bidding failed to generate fair market value at the Auction,
thereby preventing them from receiving the indubitable
equivalent of their claim.” Dist. Ct. slip op. at 55.

Although the Lenders contend that our approach here is
anomalous, the case law favors the Debtors. While the
reasoning in the myriad cases touching upon this issue is
admittedly inconsistent, no case cited by the Lenders reaches the
conclusion they advance here: that credit bidding is required

30
when confirmation is sought under subsection (iii). See, e.g., In
re River Village, 181 B.R. 795, 805 (E.D. Pa 1995) (permitting
credit bidding in a § 363(b) pre-confirmation sale but
confirming the reorganization under subsection (i)); In re
California Hancock, 88 B.R. 226, 230 (9th Cir. B.A.P. 1988)
(requiring credit bidding where confirmation was sought under
subsection (i)). Rather, most cases addressing the right to credit
bid have concluded, in keeping with the express language of the
statute, that such right arises when confirmation is sought under
subsection (ii). See, e.g., In re Kent Terminal, 166 B.R. 555,
566-67 (Bankr. S.D.N.Y. 1994) (holding that “the lienholder has
the unconditional right to bid in its lien” under subsection (ii)).

On the other hand, the Fifth Circuit has specifically
addressed whether a lender had a right to credit bid under
subsection (iii) and concluded that it did not. See Pacific
Lumber, 584 F.3d at 246. As discussed above, the court in
Pacific Lumber confirmed a sale of assets at private auction by
determining that the cash payout to the noteholders provided the
“indubitable equivalent” of their secured interest in the assets,
notwithstanding a provision barring secured lenders from credit
bidding. 584 F.3d at 246. Though Pacific Lumber was a plan
confirmation case, its holding on the threshold requirements of
§ 1129(b)(2)(A) speaks to our inquiry here – specifically, that a
debtor may proceed with a sale under subsection (iii) without
permitting secured lenders to credit bid. Accord CRIIMI MAE,
251 B.R. at 807 (reasoning that § 1129(b)(2)(A) permitted a
debtor to proceed with a sale free and clear of liens under
subsection (ii) or (iii), and that because only subsection (ii)
required credit bidding, a sale that proceeded under subsection
(iii) need only satisfy the “indubitable equivalent” requirement).

31
 This rule, which proceeds from the plain language of the
statute, is not akin to guaranteeing plan confirmation. We are
asked here not to determine whether the “indubitable
equivalent” would necessarily be satisfied by the sale; rather, we
are asked to interpret the requirements of § 1129(b)(2)(A) as a
matter of law. This distinction is critical. The auction of the
Debtors’ assets has not yet occurred. Other public bidders may
choose to submit a cash bid for the assets. The value of the real
property that the Lenders will receive, in addition to cash, under
the terms of the proposed plan has not yet been established.
And the secured claim itself has not yet been judicially valued
under § 506(a).10 We are simply not in a position at this stage

10
Section 506(a) bifurcates claims into secured and
unsecured claims based on judicial valuation of the collateral
securing the claim. The statute directs that “[s]uch value shall
be determined in light of the purpose of the valuation and of the
proposed disposition or use of such property, and in conjunction
with any hearing on such disposition or use or on a plan
affecting such creditor's interest.” 11 U.S.C. § 506(a)(1). Prior
to plan confirmation the Lenders’ present loan value will be
bifurcated into a secured claim – based on valuation of the
collateral – and an unsecured claim for the deficiency. The
“indubitable equivalent” standard is tied only to the value of the
secured claim. Thus, any present comparison between the $295
million loan and the value of the Stalking Horse Bid is
irrelevant; the Lenders are only entitled to recover the portion of
the loan that is presently secured by the value of the collateral.
For this reason, we decline to engage in the dissent’s attempt to
assess the “value” of the proposed plan relative to the amount of
the original loan. See Dissent op. Part IV. This comparison is

32
to conclude, as a matter of law, that this auction cannot generate
the indubitable equivalent of the Lenders’ secured interest in the
Debtors’ assets. We approve the proposed bid procedures with
full confidence that such analysis will be carefully and
thoroughly conducted by the Bankruptcy Court during plan
confirmation, when the appropriate information is available.

Finally, in holding that § 1129(b)(2)(A) is not
ambiguous, we are cognizant of our dissenting colleague’s
strenuous admonition that two esteemed courts below have
reached opposite, and presumably “reasonable,” interpretations
of this statutory language. Dissent op. Part II. However, as
Justice Thomas has observed, “[a] mere disagreement among
litigants over the meaning of a statute does not itself prove
ambiguity; it usually means that one of the litigants is simply
wrong.” Bank of A. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle
St. P’ship, 526 U.S. 434, 461 (1991) (Thomas, J., concurring).
The same is true of disagreements among courts. See, e.g., In re
Ford, 574 F.3d 1279, 1293 (10th Cir. 2009) (“Case law
(including this very opinion) shows that courts can reasonably
disagree on the meaning of the term under various state laws.
But the plain language of [this provision] is clear, making resort
to its legislative history unnecessary and potentially
misleading.”). We decline to hold that a statutory provision is
ambiguous as a matter of law merely because two admittedly
well-reasoned opinions below reached opposite conclusions.
Were this the case, this Court would never be permitted to
reverse on plain language grounds a district court’s holding that
a provision is ambiguous because the district court’s reasonable

both premature and misleading.

33
disagreement would itself create an ambiguity. Clearly this is
not the case. See, e.g., First Merchants Acceptance Corp. v.
J.C. Bradford & Co., 198 F.3d 394, 398 (3d Cir. 1999)
(reversing district court holding, following California
Bankruptcy Court opinion, that 11 U.S.C. § 503(b)(4) was
ambiguous, holding instead that statutory language was subject
to only one reasonable interpretation).

Because the language of § 1129(b)(2)(A) is unambiguous
– both as to the non-exclusive enumeration of permissible
treatments of secured claims, and the inclusion of a broad but
not meaningless option to provide the “indubitable equivalent”
of secured interests – we will affirm the District Court.

C. The Plain Meaning of § 1129(b)(2)(A) is Not
Inconsistent with Congressional Intent

Our opinion could stop with a plain language analysis,
however, we are cognizant that the Supreme Court has
recognized a narrow exception to the plain meaning rule in the
“rare cases [where] the literal application of a statute will
produce a result demonstrably at odds with the intentions of its
drafters.” United States v. Ron Pair Enters., Inc., 489 U.S. 235,
242 (1989); see also Griffin v. Oceanic Contractors, Inc., 458
U.S. 564, 571 (1982) (permitting a “restricted rather than a
literal or usual meaning of [statutory] words where acceptance
of that meaning . . . would thwart the obvious purpose of the
statute”); Morgan v. Gay, 466 F.3d 276, 277-78 (3d Cir. 2006)
(noting “in that rare instance where it is uncontested that
legislative intent is at odds with the literal terms of the statute,
then a court’s primary role is to effectuate the intent of Congress

34
even if a word in the statute instructs otherwise”).11 Generally,
where the text of a statute is unambiguous, the statute should be
enforced as written and “[o]nly the most extraordinary showing
of contrary intentions in the legislative history will justify a
departure from that language.” United States v. Albertini, 472
U.S. 675, 680 (1985) (internal quotation omitted). We find no
extraordinary showing of contrary intent that warrants deviation
from the plain text of the statute.

The bulk of the Lenders’ arguments, as well as the weight
of the Bankruptcy Court’s reasoning, rely on the way in which
§§ 1111(b) and 363(k) inform a lender’s right to credit bid at the
sale of the debtor’s assets. The Lenders argue that the Code
guarantees a secured lender one of two rights – either the right
to elect to treat their deficiency claims as secured under
§ 1111(b) or the right to bid their credit under § 363(k).
Because the Lenders are statutorily precluded from making a
§ 1111(b) election,12 they contend that they must be afforded the
right to credit bid at the auction.

11
In addition, we believe it is necessary to at least answer
the points raised by the Lenders and relied upon by our
colleague in his well-written dissent.
12
Recourse lenders are exempted from making a
§ 1111(b) election. See 11 U.S.C. § 1111(b)(1)(B)(ii)
(exempting secured lenders from exemption if “the holder of a
[secured claim] has recourse against the debtor on account of
such claim and such property is sold under section 363 of this
title or is to be sold under the plan”).

35
 A summary of the relevant statutory provisions informs
our analysis. Section 363 establishes certain rights and
procedures in connection with, inter alia, the sale of debtor
assets. Section 363(b) provides that the trustee “after notice and
a hearing, may use, sell, or lease, other than in the ordinary
course of business, property of the estate.” 11 U.S.C. § 363(b).
Such a sale is subject to the secured lender protections of
§ 363(k), which provide that:

At a sale under subsection (b) of this section of
property that is subject to a lien that secures an
allowed claim, unless the court for cause orders
otherwise the holder of such claim may bid at
such sale, and, if the holder of such claim
purchases such property, such holder may offset
such claim against the purchase price of such
property.

11 U.S.C. § 363(k). As discussed above, this is commonly
referred to as the right to “credit bid” and is incorporated by
reference into § 1129(b)(2)(A)(ii).

Section 1111(b) covers the treatment of certain claims
and interests of bankruptcy creditors, and provides unique
protections to undersecured lenders.13 Specifically

13
The full text of § 1111(b) reads:

(b)(1)(A) A claim secured by a lien on property of
the estate shall be allowed or disallowed under
section 502 of this title the same as if the holder

36
of such claim had recourse against the debtor on
account of such claim, whether or not such holder
has such recourse, unless–

(i) the class of which such claim is a part
elects, by at least two-thirds in amount and
more than half in number of allowed
claims of such class, application of
paragraph (2) of this subsection; or

(ii) such holder does not have such
recourse and such property is sold under
section 363 of this title or is to be sold
under the plan.

(B) A class of claims may not elect application of
paragraph (2) of this subsection if–

(i) the interest on account of such claims
of the holders of such claims in such
property is of inconsequential value; or

(ii) the holder of a claim of such class has
recourse against the debtor on account of
such claim and such property is sold under
section 363 of this title or is to be sold
under the plan.

(2) If such an election is made, then
notwithstanding section 506(a) of this title, such

37
§ 1111(b)(1)(A) is an exception to the general rule that creditors
who do not have recourse to the debtor are entitled to nothing
more than the realization of their collateral. Under § 1111(b),
Congress provided the option for nonrecourse creditors to have
their deficiency claims treated as secured debt. This is a
deviation from the process provided for in § 506(a), under which
the claim of an undersecured creditor is divided into: (1) a
secured claim equal to the court-determined value of the
collateral securing the claim, and (2) an unsecured claim for the
deficiency. 11 U.S.C. § 506(a)(1). A nonrecourse creditor who
makes a § 1111(b) election would be permitted to treat its
deficiency claim as secured. 11 U.S.C. § 1111(b)(2).

The § 1111(b) election is not available to recourse
creditors when the property is sold under § 363 or under a plan
of reorganization. 11 U.S.C. § 1111(b)(1)(B)(ii). As recourse
creditors whose collateral is being sold under a plan, the Lenders
are not eligible to make a § 1111(b) election. They argue that
the exemption of secured recourse creditors from the § 1111(b)
election is limited to situations in which they have the
opportunity to credit bid: specifically, a § 363 sale, under which
their right to credit bid is preserved by § 363(k), and a plan of
reorganization, under which their right to credit bid is
incorporated into § 1129(b)(2)(A)(ii). The import of these two
exceptions, according to the Lenders, is that Congress clearly
intended that any sale of collateral – whether under § 363 or a
plan of reorganization – would permit credit bidding by secured
lenders.

claim is a secured claim to the extent that such
claim is allowed.

38
 This argument fails in light of the plain language and
operation of the Code. As an initial matter, the Code plainly
contemplates situations in which estate assets encumbered by
liens are sold without affording secured lenders the right to
credit bid. The most obvious example arises in the text of
§ 363(k), under which the right to credit bid is not absolute. A
secured lender has the right to credit bid “unless the court for
cause orders otherwise.” 11 U.S.C. § 363(k). In a variety of
cases where a debtor seeks to sell assets pursuant to § 363(b),
courts have denied secured lenders the right to bid their credit.
See In re Aloha Airlines, No. 08-00337, 2009 WL 1371950, at
*8 (Bankr. D. Haw. May 14, 2009) (determining that “cause
exists to deny the credit bid” under § 363(k)); Greenblatt v.
Steinberg, 339 B.R. 458, 463 (N.D. Ill. 2006) (holding the
“bankruptcy court did not err in refusing to allow [a secured
creditor] to credit bid”); In re Antaeus Technical Servs., Inc.,
345 B.R. 556, 565 (W.D. Va. 2005) (denying right to credit bid
to facilitate “fully competitive” cash auction); In re Theroux,
169 B.R. 498, 499 n.3 (Bankr. D.R.I. 1994) (noting that “there
is no absolute entitlement to credit bid”).14

14
The Lenders argue that the “for cause” exemption under
§ 363(k) is limited to situations in which a secured creditor has
engaged in inequitable conduct. That argument has no basis in
the statute. A court may deny a lender the right to credit bid in
the interest of any policy advanced by the Code, such as to
ensure the success of the reorganization or to foster a
competitive bidding environment. See, e.g., 3 Collier on
Bankruptcy 363.09[1] (“The Court might [deny credit bidding]
if permitting the lienholder to bid would chill the bidding
process.”).

39
 At the heart of the Lenders’ argument is the notion that
the combined import of § 1111(b) and § 363(k) is a special
protection afforded to secured lenders to recognize some value
greater than their allowed secured claim – either by treating their
unsecured claim as a secured deficiency claim under § 1111(b),
or bidding their credit under § 363(k) in hopes of realizing a
potential upside in the collateral. Asserting an absolute right to
such preferential treatment is plainly contrary to other
provisions of the Code, which limit a secured lender’s recovery
to the value of its secured interest even when it is not permitted
to make a § 1111(b) election.15 For instance, if a debtor
proceeds with a sale of encumbered assets under subsection (i),
there is no § 1111(b) election because the assets are “sold under
the plan.” 11 U.S.C. § 1111(b)(1)(a)(ii). However,
§ 1129(b)(2)(A)(i)(I) still caps the transferred lien at the value
of the lender’s allowed secured claim, as established by judicial

15
It is perhaps this point upon which our opinion and the
dissent most fundamentally diverge. The dissent notes a variety
of rights enjoyed by secured creditors under “longstanding
nonbankruptcy law” – most notably the right to foreclose in the
event of default – and then argues that “Congress extended this
protection within bankruptcy.” Dissent op. Part III.B. While we
agree that Congress set out certain specific protections for
secured lenders, we view these protections as more evenly
balanced with the overarching purpose of the Chapter 11 – to
preserve the Debtor as a viable economic entity post-
reorganization. Tellingly in this regard, among the immediate
effects of the filing of a bankruptcy petition is a stay of all
creditors’ rights to foreclose on property of the debtor. See 11
U.S.C. § 362(a).

40
valuation under § 506(a). The deferred cash payments under
§ 1129(b)(2)(A)(i)(II), are also limited to the present value of
the deferred payments. Thus when a debtor proceeds under
subsection (i), a lender who is ineligible to make a § 1111(b)
election is still limited in its recovery to the judicial valuation of
its secured interest in the collateral.

As the court noted in Pacific Lumber, a secured lender’s
expectation of benefitting from the eventual appreciation of
collateral (the so-called “upside” of the collateral) is not an
entitlement when the property is part of a bankruptcy estate:

The Bankruptcy Code . . . does not protect a
secured creditor’s upside potential; it protects the
“allowed secured claim.” If a creditor were
over-secured, it could not demand to keep its
collateral rather than be paid in full simply to
protect the “upside potential.”

Pacific Lumber, 584 F.3d at 247. Rather, the Code provides for
a variety of treatments of secured claims, all of which are
calculated to balance the interests of the secured lender and the
protection of the reorganized entity, and none of which ensure
an advantageous return on a secured investment. These powers
are necessary to allow the debtor to “emerge from bankruptcy
with property cleansed of all hidden liens, ensuring that future
businesses will transact with the reorganized entity without fear
that an unanticipated creditor will emerge with a superior
interest in purchased property.” In re Airadigm Comms., Inc.,
519 F.3d 640, 649 (7th Cir. 2008).

41
 Because our plain reading of § 1129(b)(2)(A) is not at
odds with the operation of §§ 1111(b) and 363(k), we may only
consider the legislative history advanced by the Lenders if it
evidences an “extraordinary showing of contrary intentions” by
Congress. Albertini, 472 U.S. at 680; see also Hay Group, Inc.
v. E.B.S. Acquisition Corp., 360 F.3d 404, 406 (3d Cir. 2004)
(“The Supreme Court has repeatedly explained that recourse to
legislative history or underlying legislative intent is unnecessary
when a statute’s text is clear and does not lead to an absurd
result.” (internal citation omitted)). There is no such
“extraordinary showing” here.

The specific history on which the Lenders rely is a
congressional statement made in connection with the enactment
of § 1111(b). In that statement, Representative Edwards noted:

Sale of property under section 363 or under a plan
is excluded from treatment under section 1111(b)
because of the secured party’s right to credit bid
in the full amount of its allowed claim at any sale
of collateral under section 363(k) of the House
Amendment.

124 Cong. Rec. 31795, 32407 (Sept. 28, 1978); 124 Cong. Rec.
33130, 34007 (identical remarks of Senator DeConcini). The
Lenders contend that this statement reflects Congressional intent
to ensure that secured lenders who could not make a § 1111(b)
election had the ability to credit bid under § 363(k).

The present dispute aside, this statement ignores at least
two uncontroverted circumstances, explained above, where a

42
secured creditor has neither a right to make a § 1111(b) election,
nor a right to credit bid under § 363(k): a transfer of
encumbered assets under § 1129(b)(2)(A)(i)(I) and a for-cause
exception to credit bidding under § 363(k). Given that this
legislative history ignores these vital functions of the Code, we
cannot credit it over the plain language of the statute to confer
an absolute right to credit bid on all asset sales under
§ 1129(b)(2)(A).

Ultimately, we are left where we began – where the
statutory directive is clear we are bound to enforce that
directive. To the extent this holding permits a course of conduct
not contemplated or not desirable under the Code, as the
Lenders argue it does, it is the sole province of Congress to
amend a statute that carries out by its plain language an
undesirable end. See Lamie v. U.S. Trustee, 540 U.S. 526, 538
(2004) (“Our unwillingness to soften the import of Congress’
chosen words even if we believe the words lead to a harsh
outcome is longstanding.”).

Finally, our holding here only precludes a lender from
asserting that it has an absolute right to credit bid when its
collateral is being sold pursuant to a plan of reorganization.
Both the District Court below and the Fifth Circuit in Pacific
Lumber contemplated that, in some instances, credit bidding
may be required. See 584 F.3d at 247. In addition, a lender can
still object to plan confirmation on a variety of bases, including

43
that the absence of a credit bid did not provide it with the
“indubitable equivalent” of its collateral.16

IV.

Accordingly, we agree with the District Court and the
Fifth Circuit that § 1129(b)(2)(A) is unambiguous and that a
plain reading of its provisions permits the Debtors to proceed
under subsection (iii) without allowing the Lenders to credit bid.
Because we are directed to cease our inquiry when we are
satisfied that the applicable statutory language is unambiguous,
we will affirm the District Court on those grounds.

16
For instance, the Lenders argue here that the
Bankruptcy Court made a factual finding that the exclusion of
credit bidding was not a legitimate exercise of the Debtors’
business judgment. Because the question before us is a purely
legal one, and because we find no basis in the record for
concluding that the Bankruptcy Court’s observation was a
finding of fact, we decline to address that argument here.

44
In re Philadelphia Newspapers, LLC
No. 09-4266

SMITH, Circuit Judge, concurring.

Judge Fisher has written well, and convincingly, and I
join his opinion without reservation—save for section III(C).
I write separately because recourse to legislative history, as
occurs in section III(C), is unnecessary as the statutory
language of § 1129(b)(2)(A) is unambiguous. “[R]ecourse to
legislative history or underlying legislative intent is
unnecessary when a statute’s text is clear and does not lead to
an absurd result.” Hay Group, Inc. v. E.B.S. Acquisition
Corp., 360 F.3d 404, 406 (3d Cir. 2004) (internal quotation
marks omitted); Lamie v. United States Tr., 540 U.S. 526, 534
(2004); AT&T Inc. v. Fed. Commc’ns Comm’n, 582 F.3d 490,
496-98 (3d Cir. 2009); Official Comm. of Unsecured
Creditors of Cybergenics Corp. ex rel. Cybergenics Corp. v.
Chinery, 330 F.3d 548, 559 (3d Cir. 2003) (en banc); United
States ex rel. Mistick PBT v. Housing Auth. of the City of
Pittsburgh, 186 F.3d 376, 395 (3d Cir. 1999); see United
States v. Terlingo, 327 F.3d 216, 221 n.1 (3d Cir. 2003)
(Becker, J.) (“[W]e may only look to legislative history if
[the] plain meaning produces a result that is not just unwise
but is clearly absurd.”) (internal quotation marks omitted); see
also Mitchell v. Horn, 318 F.3d 523, 535 (3d Cir. 2003)
(Ambro, J.) (“We do not look past the plain meaning unless it
produces a result demonstrably at odds with the intentions of
its drafters . . . or an outcome so bizarre that Congress could
not have intended it[.]”) (internal quotation marks and
citations omitted). This approach to statutory interpretation

1
“respects the words of Congress” and “avoid[s] the pitfalls
that plague too quick a turn to the more controversial realm of
legislative history.” Lamie, 540 U.S. at 536.

I sympathize with the dissent’s desire to honor what it
believes was Congress’s intent in codifying § 1129(b)(2)(A).1
But the near-gymnastics required to reach its conclusion
reveal the tenuous nature of this approach. As sensible as the
dissent’s approach to credit bidding may be, I simply cannot
look past the statutory text, which plainly supports the
conclusion that § 1129(b)(2)(A) does not require credit

1
That being said, I fear that the dissent’s interest in the policy
underlying § 1129(b)(2)(A), as evidenced by its reliance on an
unpublished manuscript, Dissenting Op. Section I(A), and a
trade publication article, id. at Section II(B), both of which
prescribe a disposition for the very appeal we are tasked with
deciding, has led it astray. There may be sound policy reasons
for the dissent’s approach, but such reasons cannot overcome
the plain meaning of § 1129(b)(2)(A). See DiGiacomo v.
Teamsters Pension Trust Fund of Philadelphia and Vicinity, 420
F.3d 220, 228 (3d Cir. 2005). “We do not sit here as a
policy-making or legislative body.” Id.; Cybergenics Corp., 330
F.3d at 587 (Fuentes, J., dissenting) (joined by Sloviter, Alito,
Smith, JJ.) (“[T]he Supreme Court has rejected the notion that
the federal courts have any policy-making role in construing
clear statutory language.”); see Lamie, 540 U.S. at 538 (“Our
unwillingness to soften the import of Congress’ chosen words
even if we believe the words lead to a harsh outcome is
longstanding.”).

2
bidding in plan sales of collateral free of liens. Section
1129(b)(2)(A) uses the word “or” to separate its subsections.
“‘[O]r’ is not exclusive[.]” 11 U.S.C. § 102(5). Thus,
satisfaction of any of the three subsections is sufficient to
meet the fair and equitable test of § 1129(b)(2)(A).
“Congress, of course, remains free to change [our] conclusion
[regarding § 1129(b)(2)(A)] through statutory amendment.”
Small v. United States, 544 U.S. 385, 394 (2005); Lamie, 540
U.S. at 542 (“If Congress enacted into law something
different from what it intended, then it should amend the
statute to conform it to its intent.”). For now, we are required
to apply the statute as written, and I am satisfied that its plain
text amply supports the result reached by the majority.

3
 In Re: Philadelphia Newspapers, LLC, et al.
Nos. 09-4266 & 09-4349

AMBRO, Circuit Judge, dissenting

Although few in the first 30 years of Bankruptcy Code
jurisprudence read it that way, the majority today holds that 11
U.S.C. § 1129(b)(2)(A)(ii) is not the exclusive method through
which a debtor can cram down a plan calling for the sale of
collateral free of liens. I am convinced this is not what Congress
intended when it drafted the Bankruptcy Code.

Though I do not impugn as implausible my colleagues’
reasoning otherwise, I cannot agree that the plain language of
§ 1129(b)(2)(A) is unambiguous and compels the sole
interpretive conclusion they see as the plain meaning of the
words. There is more than one reasonable reading of the statute,
and thus we cannot simply look to its text alone in determining
what Congress meant in enacting it. When we apply long-
established canons of statutory interpretation to § 1129(b)(2)(A),
examine it in the context of the entire Bankruptcy Code, and
look at the section’s legislative history and the comments of
Code drafters, they all point to the conclusion that the Code
requires cramdown plan sales free of liens to fall under the
specific requirements of § 1129(b)(2)(A)(ii) and not to the
general requirement of subsection (iii). Thus I would reverse
the judgment of the District Court and restore the presumptive
right to “credit bid” provided in subsection (ii).
I. Background Matters

A. Factual Background

The debtors seek to sell their assets free of liens and to
stop their secured lenders from bidding at sale up to the full
credit they have extended. To understand why, we need to
know the backstory. While the majority summarizes many of
the relevant facts, I highlight a few that were omitted with
respect to the apparent motivations behind the attempt to deny
credit bidding here.

As part of a high-stakes game of chicken, the debtors
have engaged in an extensive advertising campaign related to
the proposed auction that promotes the message “Keep it
Local.” This is apparently a reference that the Stalking Horse
Bidder—largely composed of and controlled by the debtors’
current and former management and equityholders—is the
favored suitor.1 Perhaps the most striking example of the type

1
Judge Raslavich of the Bankruptcy Court picked up on this
in noting of the “Keep it Local” campaign that

there’s a lot of personal pronouns in those ads that
refer[] to “our plan” and “our retention of
ownership,” and arguably a reasonable reader of
that does come away with the notion that it’s
slanted not towards even another local bidder[,]
but to the [Stalking Horse Bidder]. That’s the
2
of game the debtors are playing is the two-years of free rent on
the building to be leased to the Stalking Horse Bidder, while
ostensibly “surrendering” the building to the secured lenders.

This did not go unnoticed by the Bankruptcy Court. It
observed that, on the facts of the case, credit bidding appeared
necessary to ensure fairness in light of the insider nature of the
Stalking Horse Bidder, the extensive “Keep it Local” campaign,
and its perception that the debtors’ strategies were designed “not
to produce the highest and best offer. . . .”2 In re Philadelphia
Newspapers, LLC, No. 09-11204, slip op. at 21 (Bankr. E.D. Pa.

fairest impression of those ads that it is endorsing
the retention of the newspaper by the stalking
horse bidder.

App. 1500a–01a (Hr’g Tr. 17:22–18:4, Sept. 9, 2009).
2
See also Vincent S.J. Buccola & Ashley C. Keller, Credit
Bidding and the Design of Bankruptcy Auctions at 18
(unpublished manuscript), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1545423
(last accessed Mar. 5, 2010) (“Because corporations and the
people who manage them often have misaligned interests, it is
hardly implausible that a debtor’s officers would seek to sell the
bankrupt’s business to a low-value bidder in exchange for some
personal remuneration that does not redound to the benefit of the
enterprise as a whole. . . . [K]eeping willing buyers from casting
bids is the most effective means for management to steer the
debtor’s assets to a favored, low-value purchaser.”).
3
Oct. 8, 2009). Indeed, the Bankruptcy Court noted that there
was “little that points to a different conclusion.” Id. The Court
gave the debtors “the benefit of the doubt as to their motives,”
yet still could “discern no plausible business justification for the
restriction [on credit bidding] which Debtors [sought] to include
in the Bid Procedures.” Id. at 22.

The Stalking Horse Bidder is seeking to pay as little as
possible to obtain the assets “on the cheap” in a Circuit where
secured lenders are allowed to bid up to the full amount of their
debt owed despite Bankruptcy Code § 506(a) (which when
applicable “split[s] . . . partially secured claims into their
secured claim and unsecured claim components”). See Cohen
v. KB Mezzanine Fund II, LP (In re SubMicron Sys. Corp.), 432
F.3d 448, 461 (3d Cir. 2006). What typically occurs is that, if
there are no other bidders, the secured lenders get the assets
rather than the Stalking Horse Bidder (unless, of course, the
Stalking Horse Bidder increases its bid to a number that is the
secured lenders’ “reservation price,” i.e., the price they are
willing to have the Stalking Horse pay cash that will essentially
be transferred to them). If credit bidding is denied, however, the
debtors’ insiders stand to benefit by having more leverage to
steer the sale to a favored purchaser (here, the Stalking Horse
Bidder). This is explained below.

B. Credit Bidding

Though the majority does not discuss it at length, an
understanding of credit bidding is helpful. A credit bid allows
4
a secured lender to bid the debt owed it in lieu of other currency
at a sale of its collateral. In SubMicron, we discussed the
rationale behind credit bidding in the context of a sale of
debtors’ property outside the ordinary course of business under
§ 363 of the Bankruptcy Code. 432 F.3d at 459–61. We held
that a secured creditor can “credit bid” the entire face value of
its secured claim, including the unsecured deficiency portion.
The reason behind this was that a credit bid “by definition . . .
becomes the value of [the] [l]ender’s security interest in [the
collateral].” Id. at 460 (emphasis in original).

The practical rationale for credit bidding is that a secured
lender would “not outbid [a] [b]idder unless [the] [l]ender
believe[d] it could generate a greater return on [the collateral]
than the return for [the] [l]ender represented by [the] [b]idder’s
offer.” Id. Conversely, if a bidder believed that a secured
lender was attempting to swoop in and take the collateral below
market value and keep the upside for itself, that bidder
presumably would make a bid exceeding the credit bid. In this
manner, credit bidding is a method of ensuring to a secured
lender proper valuation of its collateral at sale.3

3
Like the majority’s reading of SubMicron, my reading of
that opinion (which I authored) also “does not equate to a
holding that a credit bid must be the successful bid at a public
auction.” Maj. Op. at 30. SubMicron’s logic presumes that the
credit bidder will not be the buyer if another bidder values the
assets more highly. It is curious why the majority even brings
up this point, for no doubt the credit bid need not be the winning
5
 Although some may argue that credit bidding chills cash
bidding, that argument underwhelms; credit bidding chills cash
bidding no more than a deep-pocketed cash bidder would chill
less-well-capitalized cash bidders.4 Having the ability to pay a
certain price does not necessarily mean there is a willingness to
pay that price.

C. Cramdown

An understanding of cramdown is also helpful. Section
1129 of the Bankruptcy Code addresses the confirmation of
Chapter 11 plans, including plans that involve the sale of
property of the estate. Subsection 1129(a) provides the

bid; rather, the presumptive right to credit bid must be afforded
the secured creditor.
4
See also Buccola & Keller, supra, at 20–21 (“For instance,
if a would-be bidder knows that Warren Buffett plans to attend
an auction, she is also surely aware that Buffett can top her
reservation price for any or all of the assets on the block. Yet
nobody proposes to ban wealthy cash bidders from participating
in a bankruptcy auction. . . . Would-be bidders understand that
a deep-pocketed player’s ability to top their reservation price
does not imply a willingness to do so. Warren Buffett did not
become wealthy by overpaying for things, so it is possible,
indeed, probable, that his reservation price for an asset at
auction will be beneath that of another buyer. And buyers know
this in advance. The same logic holds for secured creditors.”)
(emphasis in original).
6
requirements that a plan must meet in order to gain confirmation
from the Bankruptcy Court. 11 U.S.C. § 1129(a) (“The court
shall confirm a plan only if all of the following requirements are
met . . . .”). Included is the requirement in § 1129(a)(8) that
each class of claims or interests either accept the plan or not be
impaired under it. Id. § 1129(a)(8). However, the debtor can
“cram down” the plan over the objections of an impaired class
by satisfying the requirements of § 1129(b).

The principal touchstone of cramdown under § 1129 is
that “the plan does not discriminate unfairly, and is fair and
equitable, with respect to each class of claims or interests that is
impaired under, and has not accepted, the plan.” Id.
§ 1129(b)(1). The requirements for what is “fair and equitable”
for secured claims are stated in subsection (b)(2)(A):

(2) For the purpose of this subsection, the
condition that a plan be fair and equitable with
respect to a class includes the following
requirements . . . (A) With respect to a class of
secured claims, the plan provides—

(i)

(I) that the holders of such claims
retain the liens securing such
claims, whether the property
subject to such liens is retained by
the debtor or transferred to another
entity, to the extent of the allowed

7
 amount of such claims; and

(II) that each holder of a claim of
such class receive on account of
such claim deferred cash payments
totaling at least the allowed amount
of such claim, of a value, as of the
effective date of the plan, of at least
the value of such holder’s interest
in the estate’s interest in such
property;

(ii) for the sale, subject to section 363(k)5
of this title, of any property that is subject
to the liens securing such claims, free and
clear of such liens, with such liens to

5
Section 363(k) of the Bankruptcy Code provides the right
to credit bid, and it reads as follows:

(k) At a sale under subsection (b) of this section
[a sale other than in the ordinary course of
business] of property that is subject to a lien that
secures an allowed claim, unless the court for
cause orders otherwise the holder of such claim
may bid at such sale, and, if the holder of such
claim purchases such property, such holder may
offset such claim against the purchase price of
such property.

11 U.S.C. § 363(k).
8
 attach to the proceeds of such sale, and the
treatment of such liens on proceeds under
clause (i) or (iii) of this subparagraph; or

(iii) for the realization by such holders of
the indubitable equivalent of such claims.

Id. § 1129(b)(2)(A). At issue for us is whether, when a plan
provides for a sale of secured property free of liens, subsection
(ii) is the sole point of reference for what is required to cram
down a plan on the secured creditor.

II. Section 1129(b)(2)(A) Has More Than One Plausible
Interpretation.

Though the majority attempts to use literal text in
isolation to support its conclusion, that reading cannot be the
only plausible reading of § 1129(b)(2)(A). Indeed, both the
District Court and the Bankruptcy Court read the statute in a
plausible fashion, yet came to opposite conclusions. Reasonable
minds can differ on the interpretation of § 1129(b)(2)(A) as it
applies to plan sales free of liens. This indicates that the
provision is ambiguous when read in isolation and does not have
a single plain meaning.6

6
In no way am I suggesting that disagreement between the
District Court and the Bankruptcy Court is dispositive of
ambiguity. Nor do I suggest that, when disagreement among
courts exists, we “would never be permitted to reverse [a
9
 A. The more-recent interpretation of
§ 1129(b)(2)(A) adopted by the majority

To recap my colleagues’ reasoning, § 1129(b)(2)(A)(iii)
can be used to cram down a plan sale free of liens, without
credit bidding, over the objections of creditors because they read
the plain text as unambiguous. In support of their position, they
cite to a recent decision by the Fifth Circuit Court of Appeals,
authored by its Chief Judge, a highly respected former
bankruptcy lawyer. See Bank of N.Y. Trust Co., NA v. Official
Unsecured Creditors’ Comm. (In re Pacific Lumber Co.), 584
F.3d 229 (5th Cir. 2009) (Jones, C.J.).7 That case reasons that

District Court] on plain language grounds.” Maj Op. at 33–34.
I merely point out that each reasonable interpretation has been
adopted during the course of this litigation. The ambiguity is
tied to the susceptibility of the statutory text to two reasonable
interpretations and not that two courts have seen the issue
differently.
7
This is the only appellate decision to my knowledge holding
that plan sales free of liens may be accomplished through clause
(iii). My colleagues and the debtors also refer to a Bankruptcy
Court decision of recent vintage, In re CRIIMI MAE, Inc., 251
B.R. 796 (Bankr. D. Md. 2000), but the plan in that case is
easily distinguishable. Although it involved a plan sale of
collateral free of liens and without credit bidding, there was also
substitute collateral provided to help make up for any shortfall
from the proceeds of sale. Indeed, the CRIIMI MAE Court made
note of the distinction between a plan without substitute
10
because “or” is disjunctive, the three clauses of § 1129(b)(2)(A)
are “alternatives” that “are not even exhaustive.” Id. at 245.
(The latter is because the word “includes” in § 1129(b)(2) “is
not limiting.” Id. (citing 11 U.S.C. § 102(3)).) It thereby
concluded that the clauses were not compartmentalized
alternatives. Id. at 245–46. As a result, clause (iii) could be
analyzed in isolation and could provide a means of confirmation
without regard to clauses (i) and (ii). Id. at 246–47.

The Court next determined that clause (iii) did not render
clause (ii) superfluous facially or as applied to the plan before
it. Although it recognized that “a credit bid option might render
Clause (ii) imperative in some cases,” id. at 246, it determined
that a payment of sale proceeds to the secured lenders was an
“indubitable equivalent” because “paying off secured creditors
in cash can hardly be improper if the plan accurately reflected
the value of the . . . collateral,” id. at 247. Thus, the Court
rejected the secured lenders’ right to credit bid because the plan
accomplished its sale through clause (iii) (which does not
mention credit bidding), not clause (ii) (which does).

With Pacific Lumber as authority, my colleagues reason
that § 1129(b)(2)(A) provides three distinct alternatives for a

collateral under clauses (i) or (ii), and a plan with substitute
collateral under clause (iii). 251 B.R. at 807.
11
plan sale.8 Finding Congress’s use of “or” in § 1129(b)(2)(A)

8
The majority also relies heavily on a case interpreting
ERISA § 502(a), Varity Corporation v. Howe, 516 U.S. 489
(1996), to support its textual analysis of the Bankruptcy Code.
Varity held that ERISA § 502(a)(3) (allowing actions to remedy
violations of the terms of the benefit plan or subchapter I of
ERISA) could be used to redress some breaches of fiduciary
duty to plan participants because, even though § 502(a)(2)
already addressed fiduciary duties, it merely “reflect[ed] a
special congressional concern about plan asset management.”
516 U.S. at 511. That holding does not apply to our case, and in
any event does not lead inexorably to the majority’s conclusion.
Unlike the majority, I see no way to read clause (ii) of
Bankruptcy Code § 1129(b)(2)(A) as a “special congressional
concern” without also concluding that Congress intended clause
(ii) to be exclusively applicable to plan sales free of liens.
Clause (ii) is a broad statement that any time a plan proposes a
sale free of liens, regardless of the precise method (judicial sale,
auction, etc.), it must conform to the prescriptions of that
provision. While the majority is correct that “Congress’
inclusion of the indubitable equivalence prong intentionally left
open the potential for yet other methods of conducting asset
sales,” Maj. Op. at 22, the Bankruptcy Code does not make clear
that a debtor has options “other than, and in addition to,” 516
U.S. at 511, clause (ii) for a plan sale free of liens. Certainly a
debtor has the option to use other methods of plan sales (such as
a sale subject to lien or with a replacement lien), but a plan sale
free of liens goes to the heart of clause (ii). As discussed
below, it is illogical to think that Congress had a “special
concern” only with respect to plan sales free of liens and subject
12
“not without purpose,” the majority reads the statute to

to credit bidding, and not all plan sales free of liens. The
majority is missing a step in the logical progression when it
glosses over this fact without offering a compelling reason why
the provision should be read in a manner that effectively reads
out clause (ii).
Although the majority ostensibly uses Varity to hew to
the plain text, I believe the reason why the dissenting view in
Varity was rejected is instructive. Justice Thomas found that the
Varity majority’s holding “cannot be squared with the text or
structure of ERISA.” 516 U.S. at 516 (Thomas, J., dissenting).
Applying the same two canons of statutory interpretation I apply
below (the specific governs the general and anti-
superfluousness), Justice Thomas reached the textual conclusion
that the specific provision of § 502(a)(2) provided the “exclusive
mechanism for bringing claims of breach of fiduciary duty.” Id.
at 520, 521.
The Varity Court reached its unique interpretive result
over Justice Thomas’s dissent because of particular
idiosyncracies in the text of ERISA § 502(a), none of which
exists here (such as the narrow construction of § 502(a)(2) by
the Supreme Court in Massachusetts Mutual Life Insurance
Company v. Russell, 473 U.S. 134, 142 (1985)). Clause (ii) of
§ 1129(b)(2)(A) embodies a congressional concern about all
plan sales free of liens, and clause (iii) is the general provision
enacted by Congress for plan sales not otherwise accounted for.
Unlike ERISA § 502(a)(2), there is no “remainder” in the
universe of plan sales free of liens. As such, there is no need to
take the extra step the Varity Court did and provide a statutory
hook through clause (iii).
13
“elevate[] fair return to the lenders over the methodology the
debtor selects to achieve that return.” Maj. Op. at 26. Even
though clause (ii) specifically refers to a sale free of liens and
incorporates a general credit bid right, the majority permits
plans proposing a free and clear asset sale to fall under clause
(iii) because a contrary outcome would be “at odds with the
fundamental function of the asset sale, to permit debtors to
‘provide adequate means for the plan’s implementation.’” Id. at
11 (citing 11 U.S.C. § 1123(a)(5)(D)).

B. The longer-lived interpretation of
§ 1129(b)(2)(A)

The majority presents one reading. Another (the one I
subscribe to and, as noted below, the longer-lived reading)
exists. It restricts plan sales free of liens to clause (ii).

While the Code states that “‘or’ is not exclusive” in
§ 102(5) (and that is true as a general proposition), it is not
always the case in practice. Numerous sections of the
Bankruptcy Code employ the disjunctive “or” in a context where
the alternative options render the “or” exclusive. See, e.g., 11
U.S.C. § 365(g)(2)(B)(i)–(ii) (assumption of executory contrary
before or after conversion), 506(d)(1)–(2) (voiding liens for
disallowed claims for one of two reasons), 1112(b)(1)
(conversion or dismissal of a Chapter 11 case),
1325(a)(5)(B)–(C) (requirements for confirmation of a Chapter
13 plan), 1325(b)(3)(A)–(C) (means test categories),
1325(b)(4)(A)(i)–(ii) (same); see also Williams v. Tower Loan
14
of Miss., Inc. (In re Williams), 168 F.3d 845, 847–48 (5th Cir.
1999) (holding that § 1325(a)(5)(B) & (C) required an
exclusive-or construction to avoid creating an option that
Congress did not intend to create); 2 Collier on Bankruptcy
¶ 102.06 & n.1, at 102-13 (Alan N. Resnick & Henry J. Sommer
eds., 16th ed. 2009) (noting that a non-exclusive reading is
permissible only “if context and practicality allow” and citing to
§ 1112(b) as an example where “[i]t would be impossible for the
court to do both.”). Nor is an exclusive-or in our particular
context inconsistent with the cases cited by the majority, Maj.
Op. at 16–17, for those cases hold only that the word is the
disjunctive “or,” not the conjunctive “and.” The lesson is that
we “do not read [the Bankruptcy Code] with the ease of a
computer.” Kelly v. Robinson, 479 U.S. 36, 49 (1986) (citing
Bank of Marin v. England, 385 U.S. 99, 103 (1966) (interpreting
its predecessor, the Bankruptcy Act)).

Turning to the statutory text, the operative verb in
§ 1129(b)(2)(A) is not “includes,” as the Pacific Lumber panel
believed, but “provides” (that is, “[w]ith respect to a class of
secured claims, the plan provides . . .”). Cf. In re Pacific
Lumber Co., 584 F.3d at 245–46. The majority relies on this
section of Pacific Lumber to support its view of clauses (i)–(iii)
as non-exhaustive alternatives when applied to plan sales free of
liens. Maj. Op. at 24–25. Pacific Lumber looked to the verb
“includes,” but that verb attaches to § 1129(b)(2), not (b)(2)(A).
“Includes” is the verb that applies in (b)(2) because it covers not
only secured claims in subsection (A), but also unsecured claims
in subsection (B) and classes of interests in subsection (C). In
15
contrast, once we delve into (b)(2)(A), we are solely concerned
with the treatment of a class of secured claims, and the relevant
verb is “provides,” whereby Congress prescribes specific
treatments for specific scenarios of secured-claim treatment. By
way of example, this is similar to “provided,” the verb used in
§ 1325(a)(5) and construed to require an exclusive-or
construction in In re Williams, 168 F.3d at 846–47.

The language employed by Congress in clauses (i), (ii),
and (iii) of subsection (A) thus is susceptible to another
plausible reading: Congress did not list the three alternatives as
routes to cramdown confirmation that were universally
applicable to any plan, but instead as distinct routes that apply
specific requirements9 depending on how a given plan proposes
to treat the claims of secured creditors. In contrast, the majority,
in effect, “assume[s] that the plan proponent can simply choose
which of these three disjunctive specifications of the
requirement it wishes to satisfy.” Ralph Brubaker, Cramdown
of an Undersecured Creditor Through Sale of the Creditor’s
Collateral: Herein of Indubitable Equivalence, the § 1111(b)(2)
Election, Sub Rosa Sales, Credit Bidding, and Disposition of
Sale Proceeds, 29 No. 12 Bankruptcy Law Letter 1, 7–8 (Dec.
2009). But

9
I note that § 1129(b)(2) states “the condition that a plan be
fair and equitable with respect to a class includes the following
requirements . . . .” 11 U.S.C. § 1129(b)(2). These are not mere
examples, but specific requirements to be applied to distinct
scenarios.
16
 [a] perfectly (and perhaps even more) plausible
alternative reading of the disjunctive specification
of three means of satisfying the requirement . . . is
that the plan’s proposed treatment of the secured
claim determines which of the three alternative
specifications of the requirement must be satisfied
....

Id. at 8. While “or” may be non-exclusive in the ordinary
course, the latter interpretation supports a reading of exclusivity
as applied to plan sales, with the applicable clause tied to what
a particular plan proposes.

That reading plays out as follows. Clause (i) applies to
a situation where the secured creditor retains the lien securing its
claim in a given class.10 11 U.S.C. § 1129(b)(2)(A)(i).

Clause (ii) applies to a situation where the plan “provides
. . . for the sale . . . of any property that is subject to the liens
securing such claims, free and clear of such liens.”11 Id.

10
By the very terms of clause (i), it applies “whether the
property subject to liens is retained by the debtor or transferred
to another entity.” 11 U.S.C. § 1129(b)(2)(A)(i)(I). This
includes sales of property where the secured creditor retains the
lien securing its claim because “transferred” encompasses sales.
11
I wonder if my colleagues’ conclusion is driven in part by
a misreading of clause (ii). They consider it as an “example”
17
§ 1129(b)(2)(A)(ii). It requires that the sale be “subject to
section 363(k) of [the Bankruptcy Code],” the provision that
gives a secured creditor the presumptive right to credit bid at the
sale. Id. (I say “presumptive” because the “court [can] for
cause order[] otherwise.” Id. § 363(k).) Furthermore, the
provision requires that the stripped liens move from the sold
property and “attach to the proceeds of such sale.” Id.
§ 1129(b)(2)(A)(ii). Finally, it directs that the liens transferred
to the proceeds be given “treatment . . . under either clause (i) or
clause (iii) of [§ 1129(b)(2)(A)].”12 Id.

provided by Congress and characterize it as “a free and clear
sale of assets subject to credit bidding.” Maj. Op. at 26. The
words “free and clear of such liens” in the clause modify the
noun “sale” and lead me to believe that clause (ii) is not merely
an example, but an entire category of sales that is prescribed a
specific treatment. Treating “sale . . . free and clear of such
liens” as an example as opposed to a prescription may explain
why my colleagues decline to apply the canons of statutory
interpretation I apply below. See 11 U.S.C. § 1129(b)(2)(A)(ii)
(“for the sale, subject to section 363(k) of this title, of any
property that is subject to the liens securing such claims, free
and clear of such liens”) (emphases added).
12
This provision also helps to understand in context the
hypothetical posed by the debtors’ counsel at oral argument.
See Oral Arg. Tr. at 39:23–40:22, 49:24–50:10. In this
hypothetical, a debtor has only two assets: a truck worth $100,
and a truck worth $500. The $500 truck is unencumbered, while
the $100 truck is encumbered by a $200 lien. Counsel argued
18
 Clause (iii) applies whenever the plan “provides . . . for
the realization . . . of the indubitable equivalent” of a secured
creditor’s claim. Id. § 1129(b)(2)(A)(iii). Examples of these
situations include abandonment of property and providing
substitute collateral (also known as a replacement lien).13 See 7

that the only way to confirm a plan that sells the $100 truck free
and clear of liens, and instead gives the secured creditor a $100
lien on the $500 truck, is to proceed directly through clause (iii)
to confirm the plan sale.
This is incorrect. The correct analysis is that the $100
truck is sold under clause (ii), and the $100 lien attaches to the
proceeds. The lien on the proceeds is then treated under clause
(iii), and substitute collateral is provided in the form of a $100
lien on the $500 truck. Thus, clause (ii) ably handles this
hypothetical, and further obviates plan sales through clause (iii).
Alternatively, if the debtor wanted to avoid credit bidding
in that scenario, it could change the order of operations. The
debtor would first give the secured creditor for the $100 truck
the indubitable equivalent under clause (iii) by providing a
replacement lien in the unencumbered $500 truck. It would then
sell the now-unencumbered $100 truck, and because there is no
longer a lien on that truck securing a claim, the debtor need not
worry about the credit bid provision of § 1129(b)(2)(A)(ii).
13
Even a more complicated scheme such as the CoreStates
plan discussed by the debtors’ counsel at oral argument, Oral
Arg. Tr. 34:14–35:5, fits under this paradigm because it can be
classified as a plan providing for a replacement lien or some
combination of the clauses on a collateral-by-collateral basis.
CoreStates Bank, N.A. v. United Chem. Techs., Inc., 202 B.R.
19
Collier ¶ 1129.04[2][c] & nn. 38, 52 at 1129-127, -129.
“Indubitable equivalent” is not defined in the Code, but there
can be no doubt that the secured creditor receives consideration
equal to its claim in value or amount. See Webster’s Third New
Int’l Dictionary 1154 (1971) (indubitable means “not open to
question or doubt” or “too evident to be doubted”); id. at 769
(equivalent means one that is “equal in force or amount” or
“equal in value”). Although the language of clause (iii) is broad,
as discussed below it is a “catch-all” not designed to supplant
clauses (i) and (ii) where they plainly apply.

The reading of § 1129(b)(2)(A) just noted prescribes a
specific treatment that a plan must afford to secured creditors if
it allows them to retain the liens securing property. This is
clause (i). Likewise, this reading of the statute prescribes a
specific treatment if a plan sells property free and clear of a
secured creditor’s lien. This is clause (ii). And clause (iii)
prescribes a specific treatment for situations not addressed by
either clause (i) or clause (ii).

Proponents of this view believe Congress has prescribed
the full range of possible treatments of secured claims under a
plan in a compartmentalized fashion. See, e.g., In re SunCruz

33, 49–51 (E.D. Pa. 1996) (leaving open the possibility of
confirmation under clause (iii) even though clause (i)
requirements were not met in a plan that did not call for the sale
of collateral, but instead provided for a combination of reduced
collateral and partial immediate payment).
20
Casinos, LLC, 298 B.R. 833, 838 (Bankr. S.D. Fla. 2003); In re
Kent Terminal Corp., 166 B.R. 555, 566–67 (Bankr. S.D.N.Y.
1994). Moreover, this interpretation is supported by academic
discourse. See, e.g., Brubaker, supra, at 8 (“The obvious
disjunctive specification of alternative requirements, therefore,
does not unambiguously permit the plan proponent to simply
choose the requirement that it wishes to satisfy and bypass a
requirement that specifically addresses, on its face, the treatment
that the plan proposes.”).

III. Principles of Statutory Interpretation Decide Which
of Two Reasonable Readings Is the More Plausible.

My colleagues’ reading of § 1129(b)(2)(A) is not a trip
to the twilight zone. Neither is mine. We must choose between
two plausible readings of § 1129(b)(2)(A): one that allows sales
of collateral free of liens under clause (iii) without credit
bidding, and another that only allows such sales under clause (ii)
with credit bidding generally available. With these competing
maps, we need a compass pointing to the right interpretive
result. In this context, I review the protocols for how courts
interpret statutes. This includes applying canons of statutory
interpretation, examining the context of related statutory
provisions, and, when appropriate, looking to legislative history
and comments of Code drafters to help understand a statute’s
literal words.

To know as best we can what a law means is to know as
best we can what those who wrote it meant when they did so.
21
Meaning equals intent, and intent paves the path for our
interpretation.

Our search for knowledge of intent begins with the law’s
language. In re Armstrong World Indus., Inc., 432 F.3d 507,
512 (3d Cir. 2005) (citing United States v. Ron Pair Enters.,
Inc., 489 U.S. 235, 241 (1989)). “[W]e begin with the
understanding that Congress says in a statute what it means and
means in a statute what it says there.” Official Comm. of
Unsecured Creditors of Cybergenics Corp ex rel. Cybergenics
Corp. v. Chinery, 330 F.3d 548, 559 (3d Cir. 2003) (en banc)
(citing Hartford Underwriters Ins. Co. v. Union Planters Bank,
530 U.S. 1, 6 (2000)). “When ‘the statute’s language is plain,
the sole function of the courts—at least where the disposition
required by the text is not absurd—is to enforce it according to
its terms.’” Id. (citing Hartford Underwriters, 530 U.S. at 6);
see also Ron Pair, 489 U.S. at 241. “We should prefer the plain
meaning since that approach respects the words of Congress. In
this manner we avoid the pitfalls that plague too quick a turn to
the more controversial realm of legislative history.” Lamie v.
U.S. Tr., 540 U.S. 526, 536 (2004).

Yet words that may seem plain often are not. See United
Parcel Serv., Inc. v. U.S. Postal Serv., 455 F. Supp. 857, 865
(E.D. Pa. 1978) (Becker, J.) (“Although it is received wisdom
that when a statute’s plain meaning is clear ‘the duty of
interpretation does not arise and the rules which are to aid
doubtful meanings need no discussion,’ it is also an endorsed
caveat to this rule that ‘[w]hether . . . the words of a statute are

22
clear is itself not always clear.’”) (citations omitted); see also
Tex. State Comm’n for the Blind v. United States, 796 F.2d 400,
406 (Fed. Cir. 1986) (en banc) (same).

Canons of statutory interpretation counsel courts to read
the statutory scheme in a manner that gives effect to every
provision Congress enacted and avoids general provisions
swallowing specific provisions, especially when to do so makes
the specific superfluous. See TRW Inc. v. Andrews, 534 U.S. 19,
31 (2001); D. Ginsberg & Sons v. Popkin, 285 U.S. 204, 208
(1932). In addition, any search for the meaning of words needs
context for understanding intent, particularly when dealing with
the Bankruptcy Code. Cybergenics, 330 F.3d at 559
(“[S]tatutory construction is a holistic endeavor . . . .” (citing
United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs.,
Ltd., 484 U.S. 365, 371 (1988))). A court “must not be guided
by a single sentence or member of a sentence, but look to the
provisions of the whole law and to its object and policy.” Id.
(citing Kelly v. Robinson, 479 U.S. 36, 43 (1986)). Indeed, “[a]
provision that may seem ambiguous in isolation is often clarified
by the remainder of the statutory scheme . . . because only one
of the permissible meanings produces a substantive effect that
is compatible with the rest of the law.” Timbers, 484 U.S. at
371. If ambiguity in statutory text remains, a court may inquire
beyond the plain language into the legislative history. See Blum
v. Stenson, 465 U.S. 886, 896 (1984).

Congress worked on drafting the Bankruptcy Code for
nearly a decade, and it “intended ‘significant changes from

23
[prior] law in . . . the treatment of secured creditors and secured
claims.’” Ron Pair, 489 U.S. at 240 (citations omitted). “[A]s
long as the statutory scheme is coherent and consistent, there
generally is no need for a court to inquire beyond the plain
language of a statute.” Id. at 240–41. This plain meaning
“should be conclusive, except in the ‘rare cases [in which] the
literal application of a statute will produce a result demonstrably
at odds with the intentions of its drafters.’” Id. at 242 (citation
omitted). A result may be demonstrably at odds with the
intentions of the Code’s drafters if it “conflict[s] with any other
section of the Code, or with any important state or federal
interest . . . [or] a contrary view suggested by the legislative
history.” Id. at 243.

With this in mind, applying well-established principles of
statutory interpretation leads me to conclude that
§ 1129(b)(2)(A)(ii) is the sole provision applicable to plan sales
free of liens.

A. Canons of Statutory Construction

1. Specific provisions prevail over general
provisions.

Statutory Construction 101 contains the canon that a
specific provision will prevail over a general one. See Norman
J. Singer & J.D. Shambie Singer, 2A Sutherland Statutes and
Statutory Construction § 46:5 (“Where there is inescapable
conflict between general and specific terms or provisions of a
24
statute, the specific will prevail.”). This canon long predates
both the Bankruptcy Code and the prior Bankruptcy Act, and
Congress no doubt was well aware of it when crafting the Code.
“General language of a statutory provision, although broad
enough to include it, will not be held to apply to a matter
specifically dealt with in another part of the same enactment.
Specific terms prevail over the general in the same or another
statute which otherwise might be controlling.” Popkin, 285 U.S.
at 208 (construing sections of the Bankruptcy Act of 1898)
(citations omitted); see also Nat’l Cable & Telecomms. Ass’n,
Inc. v. Gulf Power Co., 534 U.S. 327, 335–36 (2002) (“It is true
that specific statutory language should control more general
language when there is a conflict between the two . . . [, unless]
there is no conflict [and] [t]he specific controls . . . only within
its self-described scope.”); Fourco Glass Co. v. Transmirra
Prods. Corp., 353 U.S. 222, 228–29 (1957) (“However inclusive
may be the general language of a statute, it will not be held to
apply to a matter specifically dealt with in another part of the
same enactment.”) (citations omitted); Clifford F. MacEvoy Co.
v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102, 107
(1944) (same) (citing Popkin, 285 U.S. at 208).

There are two specific clauses in the context of the “fair
and equitable” requirements of a plan and one general clause.
To repeat, clause (i) applies to all situations, including plan
sales, where the lien on the sold collateral is retained. Clause
(ii) applies to all plan sales that sell the collateral lien-free. It
provides specific requirements to apply when a plan proposes
such a sale. Clause (iii) is a general provision often regarded as
25
a residual “catch-all”14 that applies to the balance of situations
not addressed by clauses (i) and (ii).

To use clause (iii) to accomplish a sale free of liens, but
without following the specific procedures prescribed by clause
(ii), undoubtedly places the two clauses in conflict. It seems
Pickwickian to believe that Congress would expend the ink and
energy detailing procedures in clause (ii) that specifically deal
with plan sales of property free of liens, only to leave general
language in clause (iii) that could sidestep entirely those very
procedures. Unlike the majority, I do not read the language to
signal such a result; I read the text to show congressional intent
to limit clause (iii) to those situations not already addressed in
prior, specifically worded clauses.15

14
In the similar context of adequate protection under § 361,
we have held that the phrase “indubitable equivalent” in the
third of § 361’s three subclauses is “regarded as a catch all,
allowing courts discretion in fashioning the protection provided
to a secured party.” Resolution Trust Corp. v. Swedeland Dev.
Group, Inc. (In re Swedeland Dev. Group, Inc.), 16 F.3d 552,
564 (3d Cir. 1994) (en banc) (emphasis added).
15
Nor is clause (ii) so specific so as to render itself
inconsequential even though it includes a proviso set off by
commas from the rest of the clause—“subject to section 363(k)
of this title.” 11 U.S.C. § 1129(b)(2)(A)(ii). The grammatical
structure of a statute, including the positioning of commas,
should be considered in statutory interpretation, and indeed, it
can “mandate” a particular reading of a statute. Ron Pair, 489
26
 Inasmuch as the majority argues that clause (ii) does not
operate as a limitation on clause (iii) because they are not in
conflict, Maj. Op. at 22–23 & n.8, I do not understand how that
can be the case here. Clause (ii) requires a presumptive right to
credit bid at a plan sale free of liens; as construed by the
majority, clause (iii) can be used in a plan sale free of liens
without a right to credit bid. When one clause makes the right
presumptive, and the other makes that right nonexistent, and
both are believed to govern an otherwise identical sale scenario,

U.S. at 241–42. Mirroring Ron Pair, which concerned the
construction of another provision in the Bankruptcy Code
(§ 506(b)), we are confronted by a “phrase . . . set aside by
commas” from the balance of the sentence. Id. at 241.
Without the commas here, the object of the sentence is no
longer a “sale,” but is instead a “sale subject to section 363(k).”
Such a grammatical structure would mean that clause (ii) only
applies to the narrow class of sales that are subject to § 363(k).
This makes no sense, inasmuch as § 363(k) on its own swims
only in the lane of non-plan sales outside the ordinary course of
business. It expands its coverage to plan sales by virtue of
§ 1129(b)(2)(A)(ii).
Thus, I believe we cannot ignore the punctuation and the
“natural reading” that Congress has provided us and limit the
scope of clause (ii). “[S]ubject to section 363(k)” is a non-
restrictive clause specifying the requirements to be followed
under clause (ii), not the scope of the clause’s applicability.
With this understanding, clause (ii) is applicable to all sales free
and clear of liens securing claims, and all sales under clause (ii)
must comply with the requirements outlined in § 363(k).
27
there is undisputably a conflict between the construction of the
provisions. Indeed, the majority later contradicts itself when it
states that “the scope of the ‘indubitable equivalent’ prong is
circumscribed by the same principles that underlie subsections
(i) and (ii).” Id. at 28. As I understand it, to circumscribe the
scope is to limit that scope. See Webster’s Third New Int’l
Dictionary 410 (defining circumscribe as “to surround by or as
if by a boundary . . . [or] to set limits or bounds to . . . [or] to
constrict the range or activity of . . . [or] to define, mark off, or
demarcate carefully”).

Although it may be facile to conclude that the general
language of clause (iii) is applicable to plan sales free of liens,
such a result ignores the specific language Congress enacted in
clause (ii).

2. The majority’s reading violates the anti-
superfluousness canon.

A “cardinal principle of statutory interpretation” is that
no provision “shall be superfluous, void, or insignificant.”
TRW, 534 U.S. at 31; see Gustafson v. Alloyd Co., 513 U.S. 561,
574 (1995) (“[T]he Court will avoid a reading which renders
some words altogether redundant.”); Mountain States Tel. & Tel.
Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249 (1985) (applying
the “elementary canon of construction that a statute should be
interpreted so as not to render one part inoperative” (citations
omitted)).

28
 As noted above, § 1129(b)(2)(A) has two specific clauses
and one general clause in the context of the “fair and equitable”
requirements of a plan. Clause (iii) cannot apply where clause
(i) or clause (ii) apply, as otherwise those clauses become no
more than measures seen only as overmuch. The Bankruptcy
Code would not need the “intricate phraseology,” Timbers, 484
U.S. at 373, of the three clauses under § 1129(b)(2)(A), but
instead would simply have said that, “[w]ith respect to a class of
secured claims, the plan provides for the realization by such
holders of the indubitable equivalent of such claims.” A
presumptive right to credit bid would not need to be specifically
mentioned if, as the majority believes, it was not a requirement
of a plan sale free of liens.

Because “[i]t is our duty ‘to give effect, if possible, to
every clause . . . of the [s]tatute,’” I do not read clause (iii) in a
fashion that renders clauses (i) and (ii) unnecessary. Duncan v.
Walker, 533 U.S. 167, 174 (2001) (citations omitted);
Gustafson, 513 U.S. at 574. To do so would render clause (ii)
“a practical nullity.” Timbers, 484 U.S. at 375. I know no
reason why Congress would want to allow the more general
language of clause (iii) to reach an outcome contrary to the
express terms of a provision in the same subsection of
§ 1129(b)(2)(A)—clause (ii). Thus, the anti-superfluous canon
supports a reading that restricts to clause (ii) plan sales free of
liens.

29
 B. Context can give clarity to statutes.

Disputed laws set in context may “clarif[y] . . . the
remainder of the statutory scheme.” Timbers, 484 U.S. at 371.
As context colors content, we look beyond the individual
provision and consider § 1129(b)(2)(A) as a part of a coherent
whole—the Bankruptcy Code. The Code recognizes that
secured lenders have bargained for a property interest in the
collateral. Under longstanding nonbankruptcy law they are
entitled to foreclose on the collateral by selling it and keeping
the proceeds up to the amount of the debt secured by the
collateral. See, e.g., Louisville Joint Stock Land Bank v.
Radford, 295 U.S. 555, 594–95 (1935) (Brandeis, J.) (“[T]he
[secured lender] [has] the following property rights recognized
by [state law]: . . . The right to protect its interest in the property
by bidding at such sale whenever held, and thus to assure having
the mortgaged property devoted primarily to the satisfaction of
the debt, either through receipt of the proceeds of a fair
competitive sale or by taking the property itself.”).

Congress extended this protection within bankruptcy and,
in keeping with the Butner principle, intended to preserve the
presumptive right of a secured creditor under applicable state
law to take the property to satisfy the debt. See Butner v. United
States, 440 U.S. 48, 55 (1979) (holding that, “[u]nless some
federal interest requires a different result,” bankruptcy law
requires “[u]niform treatment of property interests by both state
and federal courts”). In circumstances where this was not
possible, Congress provided other protections in the Bankruptcy
30
Code for the secured creditor. These other provisions explain
the object and policy of the Bankruptcy Code when addressing
the “cramdown” of a plan over a secured creditor’s objection.

Other sections of the Code related to plan sales of
encumbered property free of its liens, as well as sections
concerning the protection afforded to secured creditors, support
a reading of § 1129(b)(2)(A) that clause (ii) is the exclusive way
to confirm cramdown plan sales of property free of liens. Of
particular note are three related provisions in the
Code—§§ 1123(a)(5)(D), 363(k), and 1111(b). Those sections,
in conjunction with § 1129(b)(2)(A), are integrated parts of
congressional policy pertaining to secured creditors’ rights when
their collateral is sold, as recognized in bankruptcy’s leading
treatise and in academic literature. See 7 Collier
¶¶ 1129.04[2][b][i], [ii] & n.33, at 1129-125 to -126; Kenneth N.
Klee, All You Ever Wanted to Know About Cram Down Under
the New Bankruptcy Code, 53 Am. Bankr. L.J. 133, 155
(1979).16

1. Section 1123(a)(5)(D)

Bankruptcy Code § 1123 governs the contents of a
Chapter 11 plan, and it allows plans to provide adequate means

16
Professor Klee served as associate counsel to the
Committee on the Judiciary, U.S. House of Representatives, and
was one of the principal drafters of the Bankruptcy Code.
31
for implementation, including the “sale of all or any part of the
property of the estate, either subject to or free of any lien.” 11
U.S.C. § 1123(a)(5)(D). Plans can provide for sales of collateral
in one of two fashions: (1) subject to lien, or (2) free of any lien.
As to the liens themselves, there are two types: (a) the original
lien securing a claim, or (b) a replacement lien securing a claim.
Accordingly, we have three ways in which a plan can provide
for the sale of collateral: (i) subject to the initial lien retained by
the secured creditor, (ii) free of any lien, or (iii) after providing
a replacement lien on different collateral (such that the
previously liened collateral is sold unencumbered). These three
possibilities correspond to clauses (i), (ii), and (iii), and help to
clarify the three alternatives in § 1129(b)(2)(A).17 Section
1123(a)(5)(D) thus appears to place all plan sales of property
securing debt, which are sold clear of liens, within the purview
of § 1129(b)(2)(A).

I disagree with the majority that § 1123(a)(5)(D), in
permitting debtors to “provide adequate means for the plan’s
implementation,” allows them to craft a means (a cramdown
plan sale free of liens without credit bidding) that is contrary to
the express text of the Bankruptcy Code. The majority argues
that to “read the statute in [a limiting] manner significantly

17
Clause (iii) also applies to abandonment of property, but
that application is not implicated when the collateral is sold. See
In re Sandy Ridge Dev. Corp., 881 F.2d 1346, 1350 (5th Cir.
1989). Likewise, clause (i)’s applicability to non-sale transfers
is not implicated when the collateral is sold.
32
curtails the ways in which a debtor can fund its reorganization”
and thereby is at odds with § 1123(a)(5)(D). Maj. Op. at 24.
Taken to its logical conclusion, this argument would allow
debtors to disregard the statutory requirements of the plan
approval process so long as the motivation was to ensure
“adequate means” to implement a plan. This is a road too far.
In contrast, the reading of § 1123(a)(5)(D) I propose with
respect to plan sales is consistent with the text and the principles
of the Bankruptcy Code.

2. Section 363(k)

Section § 363 (and thus § 363(k)) applies to sales of
property outside the ordinary course of business, but § 363(k)
has been imported into § 1129(b)(2)(A)(ii). Notably, § 363 does
not specify a particular method of sale, but it does specify in
subsection (k) that a secured creditor has the right to credit bid
its debt, subject to the power of the court for cause to order
otherwise. Congress deems the ability of secured creditors to
credit bid so important that it applies as well to sales of
collateral via plans of reorganization that strip those liens.

To avoid undervaluation at a sale free of liens under
either § 363 or § 1129, a secured creditor has the option of
bidding its debt. See 7 Collier ¶ 1129.04[2][b][ii], at 1129-125.
Indeed, while many of the valuation mechanisms (such as
judicial valuation or market auction) may theoretically result in
a perfect valuation, Congress has provided the credit bid
mechanism as insurance for secured creditors to protect against
33
an undervaluation of assets sold.18 Secured creditors who
believe their collateral is being sold for too low a price may bid
it higher and use as credit the dollars they have already extended
(together with interest and other secured costs) to debtors. The

18
To support its interpretation, the majority notes that
§ 363(k) is the “most obvious example . . . under which the right
to credit bid is not absolute.” Maj. Op. at 39–40. My colleagues
argue that because “[a] court may deny a lender the right to
credit bid in the interest of any policy advanced in the Code”
through § 363(k)’s “for cause” exception, id. at 40 n.14, clause
(iii) must be available as well to circumvent the credit bid
requirements of clause (ii). This thought-track is twisted.
Whereas the default rule under clause (ii), as the majority
must concede, is presumptively to allow credit bidding “unless
the court for cause orders otherwise,” 11 U.S.C. § 363(k), the
majority’s approach allows the debtor to decide unilaterally to
deny credit bidding, with only a belated court inquiry at
confirmation to determine whether the denial of credit bidding
was “fair and equitable” to the secured lenders. The burden to
show cause that Congress carefully placed on the debtor through
clause (ii) has been shifted to the creditors through my
colleagues’ interpretation of clause (iii). See Maj. Op. at 41
(“[A] lender can still object to plan confirmation on a variety of
bases, including that the absence of a credit bid did not provide
it with the ‘indubitable equivalent’ of its collateral.”). To be
sure, the “fair and equitable” test at confirmation will be
formidable, but the majority implicitly presumes the propriety
of denying credit bidding instead of presuming the right to credit
bid.
34
benefit to debtors is that every additional dollar of value realized
by sale of the collateral is one less dollar that needs to come out
of the rest of the bankruptcy estate. This effect is evidence of
Congress’s intent to protect secured creditors and maximize
recovery at any sale free of liens, under the plan or under § 363,
through § 363(k)’s credit bidding requirement. It also supports
the reading of exclusivity for clause (ii).

3. Section 1111(b)

Section 1111(b)19 is another path by which secured

19
Section 1111(b) reads as follows:

(1)

(A) A claim secured by a lien on property
of the estate shall be allowed or disallowed
under section 502 of this title the same as
if the holder of such claim had recourse
against the debtor on account of such
claim, whether or not such holder has such
recourse, unless—

(i) the class of which such claim is
a part elects, by at least two-thirds
in amount and more than half in
number of allowed claims of such
class, application of paragraph (2)
of this subsection; or
35
creditors may protect themselves, this time from undervaluation
of the collateral securing their claims when the collateral is not
sold. Its protections have two facets. First, it allows a non-

(ii) such holder does not have such
recourse and such property is sold
under section 363 of this title or is
to be sold under the plan.

(B) A class of claims may not elect
application of paragraph (2) of this
subsection if—

(i) the interest on account of such
claims of the holders of such claims
in such property is of
inconsequential value; or

(ii) the holder of a claim of such
class has recourse against the
debtor on account of such claim
and such property is sold under
section 363 of this title or is to be
sold under the plan.

(2) If such an election is made, then
notwithstanding section 506 (a) of this
title, such claim is a secured claim to the
extent that such claim is allowed.

11 U.S.C. § 1111(b).
36
recourse secured creditor to be treated as a creditor with
recourse against the debtor for any debt deficiency that exists
because the collateral is worth less than the debt it secures. 11
U.S.C. § 1111(b)(1)(A); see also 7 Collier ¶ 1111.03[1][a][ii][B]
at 1111-16 to -17. Second, it allows a secured creditor to forgo
that deficiency claim and instead elect to have its claim treated
as if it were fully secured. 11 U.S.C. § 1111(b)(2); see also 7
Collier ¶ 1111.03[2][a] at 1111-22. Like the credit bidding
provided for in § 363(k), this election provision helps to
minimize the deficiency claims that can be asserted against the
rest of the bankruptcy estate and other unencumbered assets,
maximizing recovery for all creditors.

A § 1111(b) election is not available to a secured
creditor, however, if it is a recourse creditor and the property
securing the lien is to be sold “under section 363 of [the Code]
or . . . under the plan,” 11 U.S.C. § 1111(b)(1)(B)(ii). Thus,
while not directly referencing § 1129(b)(2)(A) in the text of the
former provision, it does make direct reference to the sale of
property under a plan, an act specifically contemplated by
§ 1129(b)(2)(A). Sections § 1129(b)(2)(A)(ii) and 1111(b) are
thus best understood as alternative protections for the secured
creditor: one to apply when its collateral is sold free and clear of
liens, and the other to apply when its collateral is treated other
than as a sale.20

20
This is not to say that the two clauses cover all scenarios.
Though not in play here, when collateral is sold subject to the
37
 As the two protections are opposite sides of the same
coin, both focused on protecting the secured creditor’s interest
in property ordinarily protected under nonbankruptcy law from
being undervalued, this suggests that Congress intended to
channel all plan sales free of liens through § 1129(b)(2)(A)(ii).
See Klee, supra, at 153 n.127 (“The collateral will be sold under
. . . § 363(k) or under the plan. In either event the recourse
lender has a right to bid at the sale [free of liens] and to offset
his full allowed claim against the purchase price.”); see also
Brubaker, supra, at 11 (“Thus the protection against being
cashed out at an unfairly low valuation that the § 1111(b)(2)
election provides is, in the event of a sale of the collateral [free
of liens], provided instead by the right to credit bid at the sale.”).
If plan sales free of liens were permitted outside of clause (ii),
the secured creditor would not only lose the undervaluation
protection afforded in non-plan-sale situations, but it would lose
the only undervaluation protection Congress provided and
considered in the sale-free-of-liens scenario.

original lien, § 1129(b)(2)(A)(ii) does not apply because the sale
is not free and clear of all liens, while § 1111(b) does not apply
because the collateral nonetheless is sold. Because this scenario
falls squarely under § 1129(b)(2)(A)(i), a clause not implicated
in this case, and its associated protections, I do not address it
here. Likewise, when collateral is sold subject to a replacement
lien, § 1129(b)(2)(A)(ii) does not apply, but that scenario falls
under § 1129(b)(2)(A)(iii) and the “indubitable equivalent”
language.
38
 * * * * *

Considering § 1129(b)(2)(A) in conjunction with
§§ 363(k), 1111(b), and 1123(a)(5)(D), their text expresses the
overall policy of Congress with respect to secured creditors
whose collateral is to be sold free of liens. They are part of a
comprehensive arrangement enacted by Congress to avoid the
pitfalls of undervaluation, regardless of the mechanism chosen,
and thereby ensure that the rights of secured creditors are
protected while maximizing the value of the collateral to the
estate and minimizing deficiency claims against other
unencumbered assets. Taken as a whole, the Code supports the
reading that funnels all plan sales free of liens into clause (ii).
See Klee, supra, at 155 n.136 (“If the collateral is sold free and
clear of the lien, then . . . § 1129(b)(2)(A)(ii) is the controlling
provision.”). This is the only reading that “produces a
substantive effect . . . compatible with the rest of the law.”
Timbers, 484 U.S. at 371.

C. Legislative history, at the right time, gives keys
to comprehension of statutes.

Some may think that seeking to know laws by their
legislative history is simply shading their shadows, resulting in
ever more confusion. But when there is no consensus about
what a law means, we ignore at our peril statements of intent put
out by the branch of government that drafted that law. See
Blum, 465 U.S. at 896 (“Where, as here, resolution of a question
of federal law turns on a statute and the intention of Congress,
39
we look first to the statutory language and then to the legislative
history if the statutory language is unclear.”); In re Mehta, 310
F.3d 308, 311 (3d Cir. 2002) (same). I thus turn to legislative
history.

Section 1129(b) was new to bankruptcy law when the
Bankruptcy Code was enacted in 1978. See 124 Cong. Rec.
31,795, 32,406 (1978) (statement of Rep. Edwards)21 reprinted
in 1978 U.S.C.C.A.N. 6436, 6474; see also Klee, supra, at 143
& n.82 (“[T]he test for secured claims [under § 1129(b)(2)(A)]
is completely novel, affording protection for classes of secured
claims that is not provided under present law.”); see also Ron
Pair, 489 U.S. at 240 (“[Congress] intended ‘significant changes
from current law in . . . the treatment of secured creditors and
secured claims.’”) (citations omitted). This new section was not
enacted in isolation, but was instead enacted in conjunction with
section 1111(b):

Together with section 1111(b) . . . , this section

21
In the specific case of the Bankruptcy Code, the Supreme
Court “ha[s] treated [Rep. Edwards’s] floor statements on the
Bankruptcy Reform Act of 1978 as persuasive evidence of
congressional intent,” Begier v. IRS, 496 U.S. 53, 64 n.5 (1990),
and most cases interpreting § 1129(b)(2)(A) have referred to
those statements, as has Collier. See, e.g., In re SunCruz
Casinos, LLC, 298 B.R. at 839; In re Kent Terminal Corp., 166
B.R. at 565; In re 222 Liberty Assocs., 108 B.R. 971, 977–78
(Bankr. E.D. Pa. 1990); 7 Collier ¶ 1129.04[1] n.1, at 1129-119.
40
 [1129(b)] provides when a plan may be confirmed
notwithstanding the failure of an impaired class to
accept the plan under section 1129(a)(8). Before
discussing section 1129(b)[,] an understanding of
section 1111(b) is necessary.

124 Cong. Rec. at 32,406. Accordingly, it is necessary to read
§ 1129(b)(2)(A) not in isolation, but (as noted above) as a
complement to § 1111(b). The latter was drafted with
§ 1129(b)’s operation in mind: “Sale of property under section
363 or under the plan is excluded from treatment under section
1111(b) because of the secured party’s right to bid in the full
amount of his allowed claim at any sale of the collateral under
section 363(k) . . . .” Id. at 32,407 (emphases added). Those
who drafted the Bankruptcy Code tell us straight out that
subsection 1129(b)’s operation contemplates credit bidding for
sales “under the plan.”

Not only was § 1129(b) a new provision, it signaled a
change from prior practice. The prior Bankruptcy Act only
required “adequate protection”—such as court determination of
fair market value of collateral after its appraisal and payment in
cash of the appraised amount—to confirm a plan over the
dissent of a secured creditor. See Klee, supra, at 143 & n.83
(citing to numerous provisions of the Bankruptcy Act). Instead
of the court-determined standard of the prior Bankruptcy Act,
the Bankruptcy Code created stronger creditor safeguards and
protections in § 1129(b)(2)(A). Part of this protection was the
ability of secured creditors to credit bid at any sale of collateral

41
free of liens.

In this context, it would be anomalous for Congress to
draft a specific provision, clause (ii), providing protections
above and beyond those given to secured creditors under the
prior Bankruptcy Act, only to allow clause (iii) to be used to
circumvent those protections and return to the precise
mechanism used prior to the Code. We have “been admonished
not to ‘read the Bankruptcy Code to erode past bankruptcy
practice absent a clear indication that Congress intended such a
departure,’” In re Montgomery Ward Holding Corp., 268 F.3d
205, 211 (3d Cir. 2001) (citation omitted). I thus also do not
presume that Congress enacted a nullity when it changed prior
practice by enacting a statutory provision.

The legislative history provides examples of the types of
situations in which clauses (ii) and (iii) would apply. Notably,
clause (ii) was termed “self-explanatory.” 124 Cong. Rec. at
32,407 (emphasis added). It allows confirmation of a plan when
the “plan proposes to sell the property free and clear of the
secured party’s lien.” Id. (emphasis added).

The legislative history also provides two examples where
a court could confirm under clause (iii)—“[a]bandonment of the
collateral to the creditor” and “a lien on similar collateral.” Id.
While it notes that an immediate cash payment less than the
secured claim would not satisfy the requirement, id., presumably
an immediate cash payment equal to the secured claim would.
What it does not say is that a sale of collateral free and clear of
42
liens can be accomplished through clause (iii); indeed, the only
example mentioned of sales free and clear of liens is through
clause (ii).

In enacting the Code to provide enhanced protections to
secured creditors, Congress only contemplated sales through the
“self-explanatory” procedures of clause (ii), not clause (iii), as
the latter was intended for situations of abandonment or
substitute collateral. Thus, I believe it is inconsistent with the
entirety of § 1129(b)(2)(A) to allow plan sales free of liens
through clause (iii).

IV. The Consequences of Applying Clause (iii) to Plan
Sales Free of Liens Are Contrary to the Settled
Expectations of Debtors and Lenders Bargaining in
the Shadow of the Bankruptcy Code.

If the debtors here prevail, a direct consequence is that
debtors generally would pursue confirmation under clause (ii)
only if they somehow concluded that providing a right to credit
bid as required by that clause would be more advantageous to
them than denying that right. This is illogical when one
considers that credit bidding is a form of protection for the
secured creditor, not the debtor. In our case, the secured lenders
are owed over $300 million secured by substantially all of the
debtors’ assets. Instead of allowing the lenders their
presumptive right to credit bid, debtors wish to confirm a plan
that sells the collateral without the procedural safeguard against
undervaluation contemplated by the Code’s drafters. Any
43
undervaluation of the collateral does not benefit the secured
lenders here, as they only receive the sale proceeds plus a
building encumbered by a two-year, rent-free lease (chutzpah to
the core). It does not even benefit the unsecured creditors, as
their recovery is independent of the sale price. The only party
that stands to benefit from any undervaluation is the purchaser
of the assets, ostensibly the Stalking Horse Bidder with
substantial insider and equity ties.

Moreover, this is not the “loan-to-own” scenario that was
mentioned by debtors’ counsel at oral argument. See Oral Arg.
Tr. 42:10–19. In that situation, the “lender’s primary incentive
is acquiring the debtor’s assets as cheaply as possible rather than
maximizing the recovery on its secured loan.” Brubaker, supra,
at 12. By contrast, in our case the secured lenders have already
loaned hundreds of millions of dollars in an arms-length
transaction, and there is no plausible assertion that this was an
attempt to “acquir[e] the debtor’s assets as cheaply as possible.”
Id. The Stalking Horse Bidder’s bid is only expected to yield
gross proceeds to the estate of approximately $41 million. In re
Philadelphia Newspapers, LLC, 418 B.R. 548, 554 (E.D. Pa.
2009) (“The Plan contemplates that the Stalking Horse Bidder
will pay a cash purchase price of $30 million, plus a
combination of payment of certain expenses and assumption of
liabilities that will yield gross proceeds to the Debtors’ estates
of approximately $41 million.”). This is small fraction of the
secured lenders’ implied loan-to-own purchase price ($295
million initial loan plus interest and costs). A winning credit bid
is hardly an acquisition “on the cheap.”
44
 If anything, this presents the opposite situation: the
Stalking Horse Bidder appears to be attempting to acquire the
debtor’s assets as cheaply as possible by “seizing upon
coordination difficulties inherent in the administration of a large
syndicated loan that might actually prevent the multiple secured
lenders from writing a check to themselves, in which case
someone else is trying to acquire the debtor’s assets on the
cheap by preventing the secured lenders from credit bidding.”
Brubaker, supra, at 12. Such a result would undermine the
Bankruptcy Code by skewing the incentives of the debtor to
maximize benefits for insiders, not creditors.

Secured creditors “have lawfully bargained prepetition
for unequal treatment” by obtaining a property interest in
debtors’ property. In re Owens Corning, 419 F.3d 195, 216 (3d
Cir. 2005). However unfair the debtors believe the credit bid
right to be, it is an important consequence of this lawful
bargaining under the Bankruptcy Code.

The secured lenders relied on their ability to credit bid in
extending credit to the debtors, reducing their costs and pricing
in accordance with their bargain. “[S]ecured credit lowers the
costs of lending transactions not only by increasing the strength
of the lender’s legal right to force the borrower to pay, but also
. . . by limiting the borrower’s ability to engage in conduct that
lessens the likelihood of repayment.” Ronald J. Mann,
Explaining the Pattern of Secured Credit, 110 Harv. L. Rev.
625, 683 (1997). As discussed above, Congress has determined
that credit bidding is necessary to ensure proper valuation of the
45
collateral at a sale free of liens. Denying secured creditors the
right to credit bid in those cases allows debtors to lessen the
likelihood of repayment of the full value of the collateral.

Instead of giving secured creditors the benefit of the
bargain struck with debtors, the debtors’ proposed reading
uproots settled expectations of secured lending. Whereas a
secured creditor ordinarily would be assured of (1) retaining its
lien on collateral and a payment stream, (2) a sale of collateral
free of its liens with a corresponding right to credit bid, or (3)
equivalent substitute collateral or the ability to take abandoned
collateral, there is now a new possibility: a sale free of its liens
without a right to credit bid. Allowing this possibility (outside
of the bargained-for loan) forces future secured creditors to
adjust their pricing accordingly, potentially raising interest rates
or reducing credit availability to account for the possibility of a
sale without credit bidding. As noted, secured creditors are
deprived of some of the presumed benefits associated with
secured lending. The Bankruptcy Code does not intend this; it
preserves the bargains for treatment made under state law unless
a federal interest directs a different result. Butner, 440 U.S. at
55. I see no such interest here, and debtors have not advanced
any federal interest supporting the consequences of their
interpretation.

V. Conclusion

Section 1129(b)(2)(A) permits the cramdown of
objections by secured creditors to plans of reorganization when
46
to do so is “fair and equitable.” To be fair and equitable, the
Bankruptcy Code sets markers that must be met. One (clause
(ii)) is that sales of collateral free of secured creditors’ liens
come with a condition: those creditors have the right at the sale
to bid up to the full amount of the credit they extended (absent
cause to take away this right). The text gives this specific right
when collateral is sold free of liens, and the question for us is
whether it can be disregarded by a general provision, nowhere
mentioning sales of collateral, that allows secured creditors’
plan objections to be overcome when the plan provides those
creditors the “indubitable equivalent” of their claims. I believe
the answer is “No.”

Allowing a plan sale free of liens under the general
provision (clause (iii)) is not implausible were we to make the
“or” between clause (ii) and clause (iii) a textual show-stopper.
But that would make us the standard-bearers of a purism that
here would ignore an equally, I suggest more, plausible reading
that plan sales of collateral are confined specifically either to
clause (i) (sales subject to liens) or clause (ii) (sales free of
liens).

Two plausible readings point me to those signposts a
court can fix on to wend its way to what Congress intended.
Each signpost—be it a canon of construction, the design and
function of the Bankruptcy Code, every signal of intent
contained in the legislative record, and commentary made by
those with the power of the pencil who were present at the
Code’s creation—steers me to a reading that clause (ii) covers
47
exclusively plan sales of assets free of liens. (In effect, a single
“or” becomes the bell, book, and candle that excommunicates
congressional intent from the Bankruptcy Code.) Moreover, the
consequences of a contrary reading include upsetting three
decades of secured creditors’ expectations, thus increasing the
cost of credit.

I conclude that Congress intended to protect secured
creditors at a plan sale of collateral free of liens by providing
them a means to control undervaluations of secured assets.
Accordingly, I would hold that § 1129(b)(2)(A)(ii) is
exclusively applicable to the proposed plan sale in this case, and
with it comes a presumptive right to credit bid by the secured
lenders. The debtors of course would remain free to argue in the
Bankruptcy Court that there is cause to preclude credit bidding
under § 363(k) or propose an alternative plan under clause (i) or
(iii) of § 1129(b)(2)(A) that does not involve the sale of property
free of liens.22

22
In any event, I do not take the majority opinion to preclude
the Bankruptcy Court from finding, as a factual matter, that the
debtors’ plan is a thinly veiled way for insiders to retain control
of an insolvent company minus the debt burden the insiders
incurred in the first place. Nor do I take the majority opinion to
preclude the Bankruptcy Court from concluding, at the
confirmation hearing, that the plan (and resulting proposed sale
of assets free of liens and without credit bidding) does not meet
the overarching “fair and equitable” requirement.
48
 Because I believe the Bankruptcy Code requires all
cramdown plan sales free of liens to be channeled through
§ 1129(b)(2)(A)(ii), I respectfully dissent.

49