The articles and Education section contains short, informative articles discussing business and legal aspects of bankruptcy auctions, Section 363 sales, workouts and restructurings.
Auctions and Section 363 sales must be approved by the Bankruptcy Court, which is part of the federal judicial system. The Bankruptcy Court approves sale procedures and must authorize the hiring of auctioneers to conduct bankruptcy sales under Section 363. Bankruptcy sales must be run fairly, with reasonable requirements that foster competitive bidding. The Bankruptcy Court approves the final bid which is usually the highest offer. In bankruptcy sales it is important to give broad notice so that the sale will be free and clear of liens and other interests.
The United States Trustee is a federal employee that supervises bankruptcy cases, including reviewing applications to hire professionals and auctioneers to conduct bankruptcy sales. The U.S. Trustee reviews fee proposals and also reviews proposed procedures for selling assets. Sale procedures are usually approved by the Bankruptcy Court before a bankruptcy sale is held.
Bankruptcy sales and auctions under section 363 require notice of the sale, including notice to secured creditors and creditors with claims to the property. Giving proper notice is important for sales free and clear of liens. Notice should also be given to unsecured creditors and to prospective bidders. Auctioneers play an important role in marketing and advertising a bankruptcy sale.
Bankruptcy Basics: The Automatic Stay
The automatic stay arises automatically when a bankruptcy case is filed and stops all efforts to sell a debtor's property. This article describes steps that the auctioneer and secured creditors can take to proceed with an auction of collateral, including some of the benefits of holding a sale or auction under Section 363 of the Bankruptcy Code. It also discusses rights of secured creditors to vacate the automatic stay.
Bankruptcy auctions and Section 363 sale are governed by written terms and conditions f sale that are given to registered bidders and announced before the calling of the auction. Bankruptcy auctions present unique problems which must be considered when drafting terms and conditions of sale. Auctioneers can help formulate the terms and conditions of sale to attract bidders and maximize value. The article discusses when sale procedures can be modified and the role of the Bankruptcy Court.
Buyers and sellers benefit from having accurate due diligence information that can be easily accessed, preferably in an online document room. In some sales strategic purchasers may have an advantage over financial purchasers. Unreliable data hurts the auction process and causes lower recoveries for creditors. Preparing accurate bid packages is an important part of marketing property for sale and getting bidders to cast reasonable bids.
Bankruptcy sale procedures may require bidders to pre-qualify and post deposits and provide financial information that funds are available to pay the anticipated purchase price. Auctions use minimum bids, bid deposits and other techniques so that the auction runs smoothly. Bidders for some types of property like real estate leases make have to establish that they are qualified to assume a lease. The trustee or debtor that is selling property has discretion to require bidders to pre-qualify, subject to review by any creditor or official committees.
Bidding incentives and "bid protections" are commonly used in bankruptcy sales. Sellers encourage bidding by using expense reimbursement, break-up fees and minimum overbid amounts. Contractual provisions that prohibit soliciting other bids are less likely to be approved because they discourage competitive bidding. Bidding incentives must be reasonable and have to be approved by the Bankruptcy Court.
Even though a bankruptcy business has defaulted under its contracts, licenses, permits and other agreements, the rights may be preserved for sale under Section 363 and 365 of the Bankruptcy Code. Contract clauses that attempt to automatically terminate rights on a bankruptcy filing may not be enforceable. Disputes over the ability of the debtor/trustee to tell contract rights can be consolidated in the federal bankruptcy court for prompt disposition. Auctioneers play an important role in valuing and marketing contract rights for sale under bankruptcy procedures.
New York - October 30, 2013 - Racebrook Capital Advisors, LLC has announced that it will be providing Debtor in Possession (DIP) bankruptcy financing to the former Marriott Hotel in Trenton, NJ while its affiliate, Sheldon Good & Company conducts the auction sale. The announcement comes following the recent court ruling in which a bankruptcy court judge determined it was not a conflict of interest to have both entities with the same parent company involved in the transaction. "The Racebrook portfolio of enterprises are uniquely qualified and experienced in all aspects of real estate including DIP lending," stated Racebrook Founder John Cuticelli. "The result of allowing Racebrook and Sheldon Good & Company to align interests is a unique value proposition that will benefit all involved in the proceedings." The 197-room hotel, no known as the Lafayette Yard Hotel & Conference Center, filed for bankruptcy this past summer. Racebrook was selected to provide DIP financing for approximately $2 million to cover operating costs while the hotel was going through the bankruptcy process. One of Racebrook's conditions on the DIP loan was that Sheldon Good, which is part of The Racebrook Portfolio Company's, conduct the bankruptcy auction sale of the property. A U.S. Trustee initially objected to Sheldon Good being the auction company, citing a conflict of interest. Earlier this month, a judge overruled this motion. "Sheldon Good & Company is a respected name in the industry specializing in real estate disposition strategies. We look forward to providing our marketing expertise and conducting a successful auction for the Lafayette Yard Hotel & Conference Center. We know that our strategic marketing platform will assist in monetizing this asset for the highest price, which is the ultimate goal for all parties involved, "stated Sheldon Good COO Stephanie Wilkinson. The Lafayette Yard Hotel and Conference Center auction is currently scheduled for November 25th. The sale will be subject to bankruptcy court approval. For more information on the auction please visit www.sheldongood.com, and for further details on Racebrook and its affiliates visit www.racebrook.com.