Asset Sales

The next evolution of insolvency practice is upon us. The morphing of what started as a restructuring practice into a § 363 sale practice is old news, while the more recent introduction of nontraditional, sophisticated financial investors into the process has brought about another evolution: the debt-to-equity conversion. Why settle for prime and three when you can use Bankruptcy Code provisions like the absolute priority rule and the securities law exemption to come out post-effective date with a freely tradable equity instrument that will enable the holder to share in all of the upside of the reorganized enterprise? This panel will explore the mechanics of a debt-to-equity conversion in the context of a chapter 11 plan in the legal context, then will explain the valuation metrics and allocation calculations that underlie the dynamics as to who gets to participate and the amount of equity offered to the various case constituencies. The discussion will also cover the tools used to spur creditor acceptance of the conversion and uses of the paradigm as a means of raising new capital for the restructured debt, such as backstop agreements and rights offerings.

The strategy of providing funding to troubled companies or purchasing existing secured debt at a discount in order to obtain ownership (so-called “loans-to-own”) continues to inspire controversy and litigation even as its use by debt financiers and other investors has become more commonplace. This panel will explore the practical considerations, business risks and legal issues associated with loans-to-own, both inside and outside of bankruptcy. Discussion on transactions outside of bankruptcy will include the scope of due diligence, intercreditor issues, insider participation, “bankruptcy-proofing,” and the risks and benefits of a “friendly foreclosure.” Discussion on transactions inside of bankruptcy will include using DIP financing to achieve ownership, potential limits on credit bidding, the impact of including or excluding insiders from the post-closing company, and risks presented by remedies such as equitable subordination and involuntary debt recharacterization.

The panel will address the pros and cons of a 363 sale, essential provisions to include in your bidding procedures and hot topics in 363 sales including credit bidding, reopening an auction, consigned goods, sale of customer information and successor liability.

This session will discuss (1) selecting a trust, LLC, plan administrator or other vehicle; (2) ensuring that affirmative claims are preserved post-confirmation; (c) establishing a value/tax basis in litigation claims and other assets transferred to a trust or LLC; (d) key plan provisions such as preserving 2004 discovery rights, creditor oversight, continuing court oversight, required reporting and the retention/transfer of the attorney/client privilege; (e) the trading of interests; (f) provisions for closing the case; and (g) structured dismissals following asset sales as an alternative to a liquidating plan (Jevic). Is it preferable to liquidate outside of chapter 11?

In 2010, at the height of the last economic downturn, there were almost three million foreclosure filings nationwide. It therefore is not surprising that almost all insolvency professionals will confront foreclosure at some point, either representing a lender considering a foreclosure filing or whose claim is affected by one, or a borrower facing threats of foreclosure. This Webinar will provide experienced and novice practitioners alike with the tools needed to advise on these situations. Following a brief overview of foreclosure and how it works, the Webinar will address current trends in foreclosure actions, including UCC issues, impediments to lenders foreclosing (e.g., Bank Secrecy Act, repository issues) and alternatives to foreclosure, and a comparison between foreclosure and bankruptcy (including approaches to asset sales, treatment of prepayment penalties, bad boy guarantees and restrictions on filing for bankruptcy). View Materials

Attorney/Client Privilege and the Crime/Fraud Exception; Busting Up “Bankruptcy Remote” Entities

Presented by the Asset Sales and Unsecured Trade Creditors Committees

Consumer Debate Resolved: An out-of-statute proof of claim violates the FDCPA. Business Debate Resolved: Assets can be sold free and clear of liens in state court receiverships. Judges Debate Resolved: Third-party releases should not be allowed in chapter 11 plans.