The Venture Industries Credit Bid

Abstract

The U.S. Bankruptcy Code provides for holders of claims against a company to use those claims as acquisition currency in an auction. It's called a credit bid. However, “bank groups” seldom attempt a credit bid and less frequently prevail in organizing one—the challenge of keeping numerous parties on the same page often proves too daunting a task, regardless of how attractive the contemplated acquisition may be. This is even more true when the original bank group has sold its claims to institutional investors with conflicting investment objectives, styles, and personalities. But it can be done. The Venture Industries (now known as Cadence Innovation) acquisition provides a template for how institutional investors can overcome such obstacles and prevail in a credit bid.