Credit bid

A bid for the assets of the company to be paid in the company’s debt rather than in cash. In situation such as bankruptcy, where a company’s assets are being auctioned, its creditors may choose to put in a credit bid for some or all of the company’s assets. If they are successful, the sale will involve the debt holders swapping all or part of their debt for the assets or for equity in the company. Often used in by loan-to-own distressed debt investors when a target company is in US chapter 11 bankruptcy, credit bids may also occur when an investment vehicle such as a CDO is being liquidated.