What is a 363 sale process?
A 363 Sale refers to the sale of an organization’s assets under Section 363 of the US Bankruptcy Code. The sale enables debtors to fulfill their obligations to creditors by selling their assets and using the funds collected to settle their debts.
Is the stalking-horse bid legally binding?
For example, if no one shows up at the auction, the stalking horse may wonder if it overbid for the assets. Once the bankruptcy court approves the stalking horse agreement, it becomes binding on all parties and difficult, if not impossible, to renegotiate.
What is the stalking horse strategy?
The stalking-horse bid method allows a distressed company to avoid receiving low bids as it sells its final assets. Once the stalking-horse bidder has made its offer, other potential buyers may submit competing bids for the company’s assets.
What is a stalking horse buyer?
In bankruptcy cases, a stalking-horse bid refers to a deal with a potential buyer that is hidden from the public, creditors, and the courts. Usually, when a company is preparing to file bankruptcy, it chooses an entity from a pool of interested bidders to make the first bid to buy the company’s assets.
What is distressed M&A?
The term ‘distressed M&A’ is a broad church with the common theme of the seller, or the business being sold, being in financial distress. Timing, deliverability and structuring are therefore critical.
What is a topping fee?
In a 363 auction a type of break-up fee that the debtor agrees to pay to an initial proposed purchaser (the stalking horse) if the proposed purchaser is not the prevailing bidder in the auction.
What is a stalking horse law?
In the context of section 363 sales in bankruptcy, a stalking horse is a bidder used to set the purchase price floor so other bidders can know the minimum to bid for the target company.
Should I sell my stock if a company files Chapter 11?
Generally, if the company’s stock retains some value the only way to capture the loss and receive a tax deduction is to sell the stock and record the capital loss based on the cost basis of the shares you sold.
What is a stalking horse in politics?
The phenomenon occurs particularly in politics, where a junior politician acts as the stalking horse to promote the interests of a senior politician, who remains unseen in case the actions would damage him or her but nevertheless wants to provoke a debate or challenge to a party colleague.
What is a DIP lender?
Debtor-in-possession (DIP) financing is financing for firms in Chapter 11 bankruptcy that allows them to continue operating. The lenders of DIP financing take a senior position on liens of the firm’s assets, ahead of previous lenders.
What is a bid credit?
Credit bidding is the process whereby a lender, with a secured charge over a borrower’s asset, bids on that asset using the very debt that is owed by the borrower to the lender. The circumstances are usually foreclosure of a lending position against a borrower.
What is distress sell?
A distressed sale refers to the sale of assets – such as securities and property – very quickly and generally at a loss to urgently cover significant debts. A distressed sale is made when the seller is going through financial pressure and is in dire need of funds to meet urgent requirements.
How do you structure a deal?
There are generally three options for structuring a merger or acquisition deal:
- Stock purchase. The buyer purchases the target company’s stock from its stockholders.
- Asset sale/purchase. The buyer purchases only assets and assumes liabilities that are specifically indicated in the purchase agreement.
What is a topping bid?
To make a bid for a security or other asset higher than the previous one. See also: Auction.
What is a reverse termination fee?
Q: What is a reverse termination fee? Professor Rock: An RTF is a fee payable by the buyer to the seller in the event of non-consummation, often due to failure to receive antitrust clearance within a certain time frame or failure to secure financing for the transaction.
What is a 363 sale?
– Definition from Divestopedia What Does 363 Sale Mean? What Does 363 Sale Mean? A 363 sale is the sale of the assets of an organization under Section 363 of the U.S. Bankruptcy Code.
What are the benefits of a 363 sale in bankruptcy?
Benefits of a 363 Sale. A 363 sale commissioned by the bankruptcy court benefits all the parties involved. Debtors who do not want to go through a reorganization benefit from the opportunity to maximize the returns from selling their assets through a competitive bidding process.
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Do common law rules on 363 sales require consideration of depreciation?
We note that the current common law rules governing 363 sales do not require consideration of this set of factors, which are potentially more value-relevant than factors, such as asset depreciation, that courts currently use to determine whether a business justification for a sale exists.