Buyers of distressed companies typically prefer to conduct their acquisitions through bankruptcy. Various provisions of the Bankruptcy Code and Rules allow a buyer to acquire assets free and clear of a wide array of liabilities.
Committees
Bidding procedures establish a road map for the sale of a debtor’s assets in bankruptcy. This article examines certain key provisions a potential bidder on such assets will want included as part of the bidding procedures. While this list is not intended to be exhaustive, it serves as a good starting point for advancing the goals of a potential bidder.
During 2016, the Asset Sales Committee leadership has strived to provide committee members with access to helpful content and the opportunity to engage in discussions on relevant issues.
Conference Programs:
Bankruptcy Code § 363(e) requires that when property is sold free and clear of an interest in property, the court shall prohibit or condition such sale as is necessary to provide adequate protection of such interest.
In our current bankruptcy regime, sales under § 363 of the Bankruptcy Code are by far the norm, followed by conversion or dismissal, and sometimes, instead, a liquidating plan. Liquidating plans can be a favorable way to wrap up a bankruptcy case, freeing the debtor from many of the filing, procedural and disclosure burdens of the Bankruptcy Code and simplifying the wind-down process.
[1]Chapter 11 has largely become the sale chapter of the Bankruptcy Code. If the case is not a quick sale case, then it probably is a debt-for-equity swap. A traditional chapter 11 reorganization is expensive and, because of its relatively low success rate, is viewed by many lenders as not worth it.
The current process for administering chapter 7 cases was established at a time when paper documents had to be hand-delivered to the courts for processing. It was an era of “runners.”
In June 2015, Bankruptcy Judge John T. Gregg ruled in In re Family Christian[1] that all administrative priority claims, including those arising under § 503(b)(9), must be paid as part of the price of a § 363 sale of the debtor’s assets.
Factual Background
One of the most significant benefits of acquiring assets out of a bankruptcy estate is the ability to obtain those assets free and clear of liens, claims, interests and encumbrances, pursuant to § 363 of the Bankruptcy Code and the terms of a bankruptcy court sale order.
We know 2015 was a bleak year for coal, oil and natural gas producers, with at least 67 bankruptcy filings. 2016 is not looking much better. Surpluses of coal, oil and natural gas continue to weigh down prices and threaten companies’ balance sheets.
Co-Chair
SC&H Capital
Ellicott City, MD
(443) 951-4846
Co-Chair
Polsinelli
Los Angeles, CA
(310) 556-1801
Communications Manager
Development Specialists, Inc.
Chicago, IL
(312) 263-4141
Education Director
Keller Benvenutti Kim LLP
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Sheehan Phinney
Manchester, NH
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Special Projects Leader
Alston & Bird LLP
New York, NY
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