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

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.