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

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


Conducted on Wednesday, May 26, 2021

Recorded event now available

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Course Materials

This CLE course 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 clear of liens, claims, and encumbrances and, in some instances, may provide a purchaser with additional protections. Buyers are often willing to pay a premium for these protections; however, there are many exceptions. Distressed investing professionals and counsel must 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, (1) the importance of pre-bankruptcy sale efforts; (2) bidding procedures, which establish a road map for the sale of a debtor's assets; (3) proper diligence procedures; and (4) 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.

Listen as our panel of experienced bankruptcy practitioners discusses the nuances of this powerful and prevalent bankruptcy tool. Our panel will review 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 purchasers (and even debtors) may be unaware, and best practices to avoid accusations of collusion. The panel will also outline how to operate a business in the days right after closing, including licensing issues, transition services agreements, and management agreements.

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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 before bid, access to documents
  5. Successor liability
  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 the flexibility to accept or reject executory contracts and unexpired leases upon closing of a 363 sale?

Faculty

Reynolds, T. Daniel
T. Daniel Reynolds

Attorney
Jones Day

Mr. Reynolds is a corporate restructuring lawyer who represents major constituencies involved in distressed...  |  Read More

Wearsch, Thomas
Thomas M. Wearsch

Partner
Jones Day

Mr. Wearsch advises clients on strategic alternatives when faced with troubled company situations. Focusing on...  |  Read More

Wilson, Thomas
Thomas A. (Tom) Wilson

Partner
Jones Day

Mr. Wilson advises corporate, financial, and municipal clients in insolvency and restructuring situations across a...  |  Read More

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