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After a bankruptcy case closed, a third party (CVC) sued the purchaser (ADM) of property acquired from the debtors in a bankruptcy sale. CVC claimed that it had a right of first refusal (ROFR) with respect to the property. In response, ADM contended that the ROFR did not survive the “free and clear” bankruptcy sale. At the request of ADM, the bankruptcy court reopened the bankruptcy case to consider the issue.[1]

What happens when property of the estate that a trustee or debtor-in-possession proposes to sell “free and clear” is subject to unexpired lease interests? The resolution of this question requires the reconciliation of two separate provisions of the Bankruptcy Code that most often operate independently and in isolation. The first provision, 11 U.S.C. § 363(f), permits a trustee or debtor in possession[1] in bankruptcy to sell assets of the estate free and clear of third-party interests.

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. By making previously undesirable and worthless companies valuable, the Bankruptcy Code maximizes value, maintains the distressed business as a going concern, and produces recoveries to creditors where none could previously exist.

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.

Break-Up Fee and Expense Reimbursement

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. Parties sometimes concentrate on whether property can be sold free and clear of an interest, and overlook the need to request and demonstrate the value of the interest that is subject to the requirement of providing adequate protection.

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. In In re Affordable Med Scrubs LLC,[1] Judge Whipple of the U.S.