Recital (55)

Member States should allow secured creditors to participate in the bidding process in the pre-pack proceedings by offering the amount of their secured claims as consideration for the purchase of the assets over which they hold a security (credit bidding). Credit bidding should not, however, be used in such a way as to provide secured creditors with an undue advantage in the bidding process, such as where the amount of their secured claim against a debtor’s assets is above the market value of the debtor’s business. As such, a secured creditor should not be able to bid the entire amount of their claim against the debtor’s business, where the business is worth less than that amount, as this could deter potential competitors from participating in the bidding process. Therefore, this Directive should restrict the amount that a creditor can bid in cases where there are under-secured or under-collateralised claims. In such cases, a secured creditor should only be allowed to bid an amount that is to be offset against the purchase price, without exceeding the market value of the business. The restriction on a creditor’s ability to bid the entire value of a secured claim does not imply that that claim loses its security interest in respect of the portion of the claim that cannot be used in the bidding process.