Section 363 Bankruptcy Sales: Key Considerations in the Auction Process, Private Sales, Due Diligence and Operations

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, May 3, 2018

Recorded event now available

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Program Materials

This CLE webinar will examine Section 363 sales, with particular focus on key issues that can impact the rights and obligations of parties in interest before, during and after an auction or private sale.

Description

Section 363 of the Bankruptcy Code provides an attractive way for purchasers to acquire assets. These sales are accompanied by a bankruptcy court order that provides the asset transfer is free and clear of liens, claims and encumbrances and, in some instances, may provide a purchaser with additional protections. Buyers often are willing to pay a premium for these protections; however, there are many exceptions to the general "free and clear" standard, and it is incumbent on distressed investing professionals and counsel to understand to appreciate the potential pitfalls of Section 363 sales.

This program will discuss a Section 363 sale from beginning to end. Our speakers will examine, among other things, (i) the importance of pre-bankruptcy sale efforts, (ii) bidding procedures, which establish a road map for the sale of a debtor’s assets, (iii) proper diligence procedures, and (iv) the pros and cons of so-called "stalking-horse bidders," break-up fees and expense reimbursements.

Other topics our speakers will address include attacks on so-called "credit bidding," including efforts to cap a bidder's currency, potential sale structures to get auction proceeds to constituencies that the debtor and buyer need to approve the sale (e.g., a creditors committee), while "skipping" administrative claim holders, when the highest bid may not be the winning bid, and other important developments that have arisen in Section 363 sales.

Our panel will also discuss how to re-open bidding after it has closed, who has judicial standing to move to re-open a sale, successor liability issues of which purchaser's (and even debtors) may be unaware, and best practices to avoid accusations of collusion. The panel will discuss how to operate a business in the days right after closing, including consider of licensing issues, transition services agreements and management agreements.

Finally, the program will also delve in to the future of Section 363 sales, and The American Bankruptcy Institute Commission to Study the Reform of Chapter 11's suggestions to Congress and how they would affect Section 363 sales.

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Outline

  1. Section 363 requirements generally—when an auction vs a private sale is appropriate
  2. The stalking-horse bid
    1. Break-up fee and expense reimbursement
    2. Super-priority administrative expense, carve-out
  3. The Bankruptcy Sale Efforts—publication, actual notice to parties-in-interest
  4. Due diligence—reasonable period prior to bid, access to documents
  5. Successor Liabilty
  6. Executory contracts and unexpired leases
  7. Attacks on credit bidding
  8. How to close the sale
  9. Operating the business post-sale
  10. The future of Section 363 sales

Benefits

The panel will review these and other key issues:

  • What role does the stalking-horse bidder have in formulating the bidding process, and what are its primary concerns?
  • What notice and due diligence rights should bidders want to see in the bidding procedures?
  • What process should be followed for accepting and distributing qualified bids?
  • How can a bidder ensure it has flexibility to accept or reject executory contracts and unexpired leases upon closing of a 363 sale?

Faculty

Harris, Adam
Adam C. Harris

Partner
Schulte Roth & Zabel

Mr. Harris is chair of the Business Reorganization Group and a member of the firm’s Executive Committee. His...  |  Read More

Manoukian, Kristine
Kristine Manoukian

Partner
Schulte Roth & Zabel

Ms. Manoukian specializes in financial restructuring and bankruptcy. She focuses her practice on corporate...  |  Read More

Bentley, James
James T. Bentley

Special Counsel
Schulte Roth & Zabel

Mr. Bentley represents clients in complex transactions, litigation financing, advisory matters relating to...  |  Read More

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