ABI’s Asset Sales Committee announced that In re Verity Health System of California Inc., Case No. 2:18-bk-20151-ER (C.D. Cal.), won the committee’s third annual “Asset Sale of the Year” award.
Two recent district court decisions, each involving appeals of a bankruptcy sale order where the appellant(s) failed to obtain a stay pending appeal, provide insight into statutory mootness under § 363(m) of the Bankruptcy Code. In both In re HDR Holdings Inc.[1] and Barnes v.
More U.S. companies filed bankruptcies with liabilities exceeding $1 billion in 2020 than in any year since 2009.[1] Bankruptcy courts are often left with difficult decisions in these complex bankruptcies, including whether to approve the winning bid in an asset sale under § 363. Part of the difficulty is applying the standard for approving a winning bid.
“Stalking horse” is a term that instills hope in the minds of creditors and debtors while striking fear in the hearts of other bidders. When running a § 363 sale process, identifying a stalking-horse bidder (the bidder that submits the highest and best initial bid) lays the groundwork for the rest of the proceedings. The stalking-horse bid effectively sets the floor price for the assets and is used to entice other groups to pay more and eventually participate in an auction. So why would anyone choose to be the stalking horse?
Recent allegations of impropriety of bidders in the reorganization of Neiman Marcus Group Ltd. LLC should serve as a reminder to study the line between mere auction strategy and collusive bidding. The word “collusion” itself seems to cause confusion whenever it is uttered in the political or legal realms. Fortunately, in the context of bankruptcy sales, the Bankruptcy Code provides some parameters for what constitutes collusion.
One of the hallmarks of purchasing assets from a bankruptcy estate under § 363 of the Bankruptcy Code is the perceived ability of a buyer to purchase those assets “free and clear of any interest in such property” if certain conditions are met.[1] A common phrasing in many motions seeking to sell assets under § 363 is that the assets are to be sold “free and clear of all liens, claims and encumbrances.” But that is not what the statute actually says.
ABI’s Asset Sales and Ethics and Professional Compensation Committees sponsored a great webinar on Feb. 10 titled "Navigating Ethical Issues During Asset Sales." More than 150 attendees heard panelists Steve Blank of King & Spalding, Joe Briggett of Lugenbuhl and Ken Mann of SC&H Capital discuss ethical issues professionals may face in asset sales, while weaving in some very entertaining, real-life stories from previous deals.