Category Archives: 363 Sales

So You Want to Sell (or Buy) A Company Under Section 363? Here’s How

With companies facing significant distress due to vast over-leverage, debtors have increasingly turned to asset sales under Section 363 of the Bankruptcy Code, rather than Chapter 11 plans, to dispose of their assets quickly and begin the process of winding down their estates. According to the UCLA-LoPucki Bankruptcy Research Database, less than 4 percent of all large, public company bankruptcies were resolved by substantial asset sales from 1990-2000. However, in the period from 2001-2010, that figure rose to nearly 20 percent – peaking in 2011 when 43 percent of large public cases were resolved by an asset sale. Continue reading

Not So Fast – 363 Sales May Not Be Free and Clear of Future Claims

In recent years, section 363 sales have increased in prominence. According to the UCLA-LoPucki Bankruptcy Research Database, less than 4 percent of all large, public company bankruptcies were resolved by sales of all or substantially all of a debtor’s assets from 1990-2000. However, in the period from 2001-2010, that figure rose to nearly 20 percent – peaking in 2008 when 32 percent of large public cases were resolved by an asset sale.[i] Purchasers like section 363 sales because, among other reasons, they purchase assets “free and clear” of all pre-bankruptcy obligations under section 363(f) of the Bankruptcy Code. However, as 363 sales increased in frequency, courts have begun to limit the free and clear nature of those sales, particularly with respect to future claims that had not arisen at the time of the sale. Continue reading

Recoupment Affirmative Defense Not Extinguished by Debtor’s 363(f) Sale

On March 30, 2012, Judge Sidney H. Stein of the District Court for the Southern District of New York held that a claimant’s affirmative defense of recoupment was not extinguished by the debtor’s section 363(f) sale. Hispanic Independent Television Sales LLC v. Kaza Azteca America Inc., 10 Civ. 932 (SHS), 2012 U.S. Dist. LEXIS 46239 (S.D.N.Y. Mar. 30, 2012). Continue reading

Structured Dismissals (Part I of II): Another Possible Chapter 11 Exit Strategy to Consider After a Sale of Substantially All Assets

As courts and commentators alike have observed in recent years, sales of substantially all assets pursuant to section 363 of the Bankruptcy Code prior to confirmation of a chapter 11 plan have become common practice in large-scale corporate bankruptcy cases. Chapter 11 debtors who effectuate such sales traditionally must pursue one of three possible options for concluding the chapter 11 case: (i) confirmation of a plan of reorganization or liquidation, (ii) conversion of the case to a case under chapter 7 of the Bankruptcy Code, or (iii) entry of an order dismissing the case and returning all parties to their respective state law rights and remedies. However, when these courses of actions are not feasible or otherwise are simply not appropriate or practical under the circumstances, debtors are increasingly turning to structured dismissals as an alternative chapter 11 exit strategy. This blog post provides an overview of structured dismissals, and discusses how and when they are used. Part II of this series will discuss several examples of structured dismissals from recent chapter 11 cases. Continue reading

Seventh Circuit Reaffirms Secured Creditors’ Right to Credit Bid

In an opinion that has created the most significant bankruptcy-related circuit split in recent years, the U.S. Court of Appeals for the Seventh Circuit in In re River Road Hotel Partners, LLC1 vindicated secured lenders’ unqualified right to credit bid on asset sales under a chapter 11 plan. The Seventh Circuit in River Road rejected the rationale of the U.S. Court of Appeals for the Third Circuit in In re Philadelphia Newspapers, LLC. Continue reading