Section 363 Bankruptcy Sales: Credit Bids and Distressed Asset Transactions
Legal Strategies for Buyers and Lenders
Recording of a 90-minute CLE webinar with Q&A
Conducted on Tuesday, May 12, 2009
Recorded event now available
This seminar will review the Section 363 bankruptcy sale process, the expanding use of credit bids by investors in distressed debt, the implications of the Clear Channel case on credit bids, and offer best practices for buyers and secured creditors involved in Section 363 sales.
Description
Increasingly, bankruptcy has become a vehicle for sale rather than reorganization. Large shortfalls between secured debt and market value of collateral, and a dearth of buyers with cash or financing to bid, make it more common for secured creditors to successfully credit bid on their collateral.
An emerging strategy of investors is “loan to own” whereby an investor buys the debt of a distressed business at a steep discount, and once the company is in bankruptcy, makes a credit bid at auction for the face amount of the debt, and converts it to a controlling equity position.
The bankruptcy code generally favors secured creditors, but there are viable means for other creditors to challenge credit bids. Moreover, Clear Channel calls into question the prevailing assumption that a secured creditor's successful credit bid qualifies as a "free and clear" sale.
Listen as our panel of bankruptcy attorneys discusses the bankruptcy sales process, the varying strategies for secured creditors in submitting credit bids, and best practices for making and overcoming challenges to credit bids.
Outline
- Asset sales generally
- Standards for approval under Section 363
- Sale procedures
- Use of professionals
- Due diligence
- Stalking horse bidders
- Auction process
- Sale order
- Credit bids generally
- Secured status
- Claim amount
- Bid amount
- Consent requirements in multi-lender financings
- Ownership structure and governance
- Additional financing
- Challenges to credit bidder’s standing
- Recharacterization of debt
- Good faith
- Equitable subordination
- Secured creditor issues
- Defending a loan to own strategy
- Credit bids after Clear Channel
- Asset sales as part of a plan of reorganization
Benefits
The panel will review these and other key questions:
- How can unsecured creditors mount an effective challenge to a secured lender's credit bid?
- How can a secured creditor defend its loan-to-own strategy against credit bid challenges?
- What is the impact of the Clear Channel Outdoor Inc. v. Knupfer decision on credit bids and buyers in bankruptcy sales?
Faculty
Thomas M. Horan, Member
Womble Carlyle,
Wilmington, Del.
He focuses his practice on bankruptcy and creditors rights matters and is experienced in representing a broad range of entities in complex commercial bankruptcy cases including debtors, committees, debtor-in-possession lenders, secured and unsecured creditors, trustees, landlords, lessors, insurers and parties purchasing assets. He regularly defends preference and fraudulent transfer actions.
Derek M. Stoldt, Partner
Kaye Scholer,
New York
He focuses his practice on mergers and acquisitions, public and private securities offerings, joint ventures and licensing arrangements. His clients include financial sponsors, such as private equity, hedge and venture capital funds, as well as public and private companies in a range of industries.
Michael B. Solow, Partner
Kaye Scholer,
Chicago
He has over 20 years experience representing creditors, trustees and governmental agencies and other parties nationwide in the bankruptcy and insolvency area. He is Co-Chair of the firm's Business Reorganization and Creditors' Rights Department and is a frequent lecturer on various topics relating to dealing with insolvent entities.
Recordings
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Customer Reviews
I thought the speakers were very well versed.
Richard A. Graham
White & Case
The program got right to the substance and did not spend lots of time on background/basics, providing a very sophisticated treatment of the issues.
John Hall
Lewis Rice
Each speaker's topic was distinct. The written materials were also excellent and contained useful information and tips.
Una Kang
Saiber
The webinar was informative on the current issues.
Lauren Bernstein
Kaye Scholer
I felt the program topic was well presented within the short time limit.
Kathy Pilkington
McGuireWoods
Bankruptcy Law Advisory Board
Adjunct Professor
Northeastern University
Partner
ForemanLaw
Matthew Gensburg
Shareholder
Greenberg Traurig
Partner
Dechert
Shareholder
Vedder Price
Partner
Nixon Peabody
Senior Consultant
JND Corporate Restructuring
Partner
Kaye Scholer
Counsel
Skadden Arps Slate Meagher & Flom
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