“Who doesn’t love a good sale” are the introductory words used in A Comparison Shopping Guide for 363 Sales, written by Kelly K. Frazier and published this summer by ABI. But, how does a lawyer conduct a business asset sale pursuant to 11 U.S.C. §363? Or better yet, how does a lawyer advise the debtor-in-possession, potential purchaser or secured lender? These questions and more were answered in this manual.
As a beginning attorney knee-deep in his or her first chapter 11 bankruptcy and impending asset sale pursuant to §363, one is hard-pressed to find a better reference guide to demonstrate the ins and outs of a §363 sale. Each chapter begins with the usual bankruptcy terms and concepts involved in a typical §363 sale. What makes this manual unique from other bankruptcy guides and resources is that the concepts are explained in simple, easy-to-understand terms for a typical non-lawyer buyer of distressed business asset sales, but not so simple as to be distracting to an experienced bankruptcy practitioner. For example, in Chapter Two, the manual first gives a definition of an “executory contract” and then quickly moves on to how they are treated in a 363 context with examples.
Regarding content, the manual begins by walking the reader through basic restructuring options available to a distressed business and then goes on to discuss the typical bankruptcy sale process. However, this is mere backdrop to the wealth of information packed in the remaining chapters of this manual.
As stated in the introduction of the manual: “This manual is intended to help the potential purchaser (and seller) compare terms and conditions of sale transactions conducted pursuant to §363 of the Code, so that you know exactly what the market has to offer (and what it doesn’t).”
The author compiled and analyzed approximately 60 asset sales approved in 54 bankruptcy cases pending in 15 different jurisdictions. The results of this study are not only found in the content of the chapters of the manual, but are also readily accessible on the CD included with the manual. The CD contains charts of all 60 cases, allowing the reader to compare and contrast the elements of each sale. This would be useful to any lawyer advising his or her client, as well as for the clients themselves so that they know the appropriate expectations for business-asset purchases during a 363 sale.
For each reference made in the manual relating to the empirical data, the CD provides a chart in the appendices. For example, Chapter Three discusses at length how the deposits of buyers can be treated. With regard to deposits, the manual referred to a specific appendix on the CD. The first chart provided on the CD associated with buyer deposits gave a summary of language used in those sales transactions relating to the timing and the amount of the buyers’ deposits. The other chart associated with buyer deposits gave a summary of the language used in those sales transactions in which the deposit was refunded to the potential purchaser. This research is an invaluable tool for advising your client as to what an appropriate deposit is and the appropriate language that should be used in the purchase and sale agreement. The remainder of the manual follows this pattern and discusses everything from the initial bidding process to post-closing retention of records and post-closing transition services.
However, this manual lacks a chapter specifically devoted to §363 sales by chapter 7 trustees, which may cause one to believe that the title of the book is mildly misleading. This manual is not for an attorney or non-business asset purchaser seeking to learn about other §363 sales, which occur with much greater frequency in the chapter 7 context and usually by a chapter 7 trustee. While briefly touched upon in this manual, A Comparison Shopping Guide for 363 Sales is primarily for the purchase and sale of businesses or business assets by a debtor-in-possession, and is not a step-by-step guide for an attorney representing a chapter 7 trustee not involved in a business asset sale.
In conclusion, A Comparison Shopping Guide for 363 Sales is a must-read, whether a beginner bankruptcy practitioner or a seasoned bankruptcy attorney. This manual should be mandatory for any business professional seeking to purchase business assets through a §363 sale as well as for the debtor-in-possession seeking to effectuate a sale, not to mention a secured lender finding itself involuntarily thrust into a §363 sale.