Abe’s Boat Rentals Inc. filed for chapter 11 on April 27, 2018, in the U.S. Bankruptcy Court for the Eastern District of Louisiana. On Feb. 22, 2019, the debtor filed an Application for Order Authorizing Employment of Whelton Marine LLC as Marine Broker (the “Application to Employ”) in order to sell a 2008 Tiara 4300 Sovran yacht (the “vessel” or “M/V Heaven”). On April 24, 2019, the court granted the Application to Employ and instructed that any sale of the vessel was subject to approval by the court and that the net sales proceeds from any approved sale would be held by debtor’s counsel in a trust pending further order by the court.
The vessel, named M/V Heaven, was the one vessel in the debtor’s fleet of 17 total vessels that was not encumbered and was primarily used as a pleasure craft for entertaining and business development. A June 19, 2017, appraisal of the M/V Heaven estimated its market value to be $373,750. The Vessel Brokerage Central Listing Agreement, which was attached to the Application to Employ, listed the asking price of the vessel at $349,000.
After being marketed for sale on various websites for several months, on April 4, 2020, in the midst of the COVID-19 pandemic, the debtor was finally able to enter into a Vessel Purchase and Sale Agreement with a buyer (the “initial buyer”) to sell the M/V Heaven for $125,000, far below its appraised value. The Purchase and Sale Agreement provided quick deadlines and allowed only until April 25, 2020, for the buyer to accept the vessel and a closing date of no later than May 1, 2020.
On April 10, 2020, the Debtor filed an ex parte motion to expedite a hearing on the emergency motion to approve the sale of the M/V Heaven, subject to an auction. The Court granted the expedited hearing, approved the bidding procedures, and set the auction and hearing for April 28, 2020. The bidding procedures required, inter alia, that anyone wishing to be a qualified bidder make an offer of at least $10,000 higher than the $125,000 purchase price and be accompanied by a cashier’s check in the amount of $15,000 made payable to Whelton Marine LLC as a good-faith deposit. The bid deadline was five business days prior to the hearing, April 23, 2020.
Fortunately, one interested party out of Miami qualified as a bidder under the bidding procedures. The weekend before the scheduled auction and hearing, a third party requested to participate in the auction. Given the shortened deadline and the COVID-19 pandemic, counsel for the unsecured creditors’ committee urged debtor’s counsel to bring this issue to the court’s attention and allow the court to decide whether to permit this third party to participate. Debtor’s counsel agreed, and committee counsel suggested that the third party provide a deposit prior to the hearing via wire. The third party agreed.
Without the ability to appear before the court given the State of Louisiana’s public emergency related to COVID-19, on April 28, 2020, the court conducted a Webex auction and hearing on the sale of the M/V Heaven. Judge John W. Kolwe oversaw the proceedings from the Western District of Lafayette, even though the case was pending in the Eastern District of Louisiana. At the onset of the auction and hearing, Judge Kolwe considered the third party’s ability to participate in the auction despite his lack of complying with the bidding procedures. The committee supported the third party’s participation given the timing of the auction and hearing, as well as the lack of prejudice to the other parties. After hearing the parties’ various positions (including the initial buyer and a second qualified bidder), the court allowed the third party to participate in the auction. With the participation of the three interested buyers, the auction took place via Webex. The bidding pushed the price of the M/V Heaven up to $209,000, with the initial buyer being the winning party. The sale order was entered on April 29, 2020, and the M/V Heaven was sold free and clear of all liens and encumbrances the following week.