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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Credit bid

What is a credit bid, and how does a secured lender use one?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A credit bid is an offer to buy an insolvent borrower's assets in which a secured lender pays with the debt it is owed instead of cash, usually through a new company it controls. A lender owed US$50m might bid US$35m of that debt for the business, take ownership, and keep a claim for the remaining US$15m against whatever else is left. It is a statutory right in US bankruptcy sales; in the UK and Australia it rests on practice rather than statute, through a sale by an administrator or receiver, who must still be able to show the price was proper.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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CREDIT RISK AND PROBLEM LOANS

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