How the sale process works
In a 363 sale bankruptcy, the debtor asks the court to approve a sale of assets outside of a plan. The process usually starts with a motion to approve bidding procedures, often with a stalking horse bidder whose initial offer sets the floor. Other bidders can then submit competing offers, and an auction may follow. The court holds a sale hearing to approve the successful bid, and an order typically transfers the assets free of many liens and claims, with those interests attaching to the sale proceeds. The pace can be fast, since buyers and lenders often want the sale closed quickly. Selling outside a plan is often chosen when the assets are losing value and waiting for a full plan would erode the price.
Positions buyers and creditors take
Stalking horse bidders often negotiate a breakup fee and expense reimbursement, which require court approval. Secured lenders may be allowed to credit bid their debt instead of paying cash. Buyers should seek a finding that they acted in good faith, because it limits the risk that the sale is undone on appeal. Creditors who believe the price is too low or the process unfair can object, and the court considers whether the sale reflects sound business judgment. Gather the asset purchase agreement, bid procedures order, and any marketing materials early.
Deciding how to participate
Whether you are a buyer, a lender, or an unsecured creditor, the first step is understanding the timeline and the documents. Buyers need diligence on what is being sold and what liabilities might follow the assets despite the sale order. Lenders need to decide whether to credit bid or let others bid. Unsecured creditors may want to challenge the process or seek a share of the proceeds. We help clients review the documents, meet the deadlines, and make decisions based on what the court is likely to approve.
