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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.
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.
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.
[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.”
