My firm has just been hired to manage the 363 sale and auction process of a company in default. I understand the process and the different steps.
Right now we are in the process of qualifying bids and then will move onto analyzing the qualified bids.
I wanted to get your thoughts and experiences with this process regarding how to go about analyzing bids.
I am also interested in getting some more info on analyzing the contracts assumed and whats the general methodology of figuring out the cure amounts on the liabilities?
Your person experience and any guidelines or resources that can shed more light on this will be greatly appreciated!
Has your firm found the stalking horse bidder and settled the breakup fee, topping fee, and expense reimbursements?
Are secured creditors likely to bid on the any collateral? If so will you seek to disallow credit bids, i.e. only cash bids under §§1123(a) and (b) and 1129 of the Code?
Which venue are you filing in?
Yes, we are past the point of finding a stalking horse bidder and getting the court to approve on fees.
It is in Southern California. I'm not 100% sure on credit bids and will find out soon. I am a new hire and the MD just contacted gave me some docs and told me to familiarize myself.
What is your DIP financing game plan? I have seen stalking horse bidders source the debtor-in-possession financing. Sometimes the DIP will feature PIK interest to conserve cash.
Do you have a marketing plan to get competing bidders?
At the first hearing you need to establish biding procedures and sale procedures. You need to ask the bankruptcy court to enter an order (motion) that prohibits the debtor from shopping the assets; you need to set the time for and manner of submitted competing bids; set forth the required minimum terms of competing bids; set a date for an auction of the debtor’s assets; and set a final hearing on the sale. Alot of the terms will be driven by the stalking horse bidder on one side and the company and creditors committee on the other side. If the stalking horse has DIP financing this can create an measure of control for competitors.
Here is an example of what I am talking about:
http://files.ali-aba.org/thumbs/datastorage/skoob/forms/IV-D-9_thumb.pdf http://www.orb.uscourts.gov/Rules_Form/file_attachment/2002070803100955…
Quals requirements for competing bidders (both strategic and financial buyers) pivots on the four following points:
-Who brings the most cash to the table -The Conditions to Closing -The types of Reps and Warranties -What type of bid procedures and break-up fee demanded
Assuming the auction is being conducted postpetition, bidders will want to look at title reports, UCC filings, court dockets, etc. for mechanics’, creditors’ and tax liens, terms of leases, environmental problems, etc.
You need to show the MD your the man (assuming your a man, lol), the 363 process moves fast.
Additional Resources:
In an old thread from The Restructuring Group, Boris23 put together a restructuring book list:
•Distressed Debt Analysis: Strategies for Speculative Investors. Stephen G. Moyer (Get this one.) ISBN-13: 978-1932159189
•Distressed Investment Banking - To the Abyss and Back (Hardcover) Henry F. Owsley and Peter S. Kaufman ISBN-13: 978-1587982675
•Corporate Financial Distress and Bankruptcy: Predict and Avoid Bankruptcy, Analyze and Invest in Distressed Debt , 3rd Edition. Edward I. Altman (Author), Edith Hotchkiss (Author) " ISBN-13: 978-0471691891
•Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups by Stuart C. Gilson ISBN-13: 978-0471405597
•Chapter 11 Business Reorganizations: For Business Leaders, Accountants And Lawyers by Myles H. Alderman Jr ISBN-13: 978-1598004137
•Corporate Restructuring: John J. McConnell ISBN-13: 978-1843767275
•Restructuring and Workouts by Ben Larkin
•Other books that describe the subject like: "Valuation, Mergers, Buyouts and Restructuring" by Enrique Arzac and "Mergers, Acquisitions and Corporate Restructuring" (Patrick A. Gaughan)
Others recommended Ten Cents on the Dollar: Or the Bankruptcy Game by Sidney Rutberg
There is also Wall Street Prep's Restructuring & Bankruptcy Modeling Training Program http://www.wallstreetprep.com/programs/self_study/bankruptcy.php
There is also the Certified Insolvency & Restructuring Advisor (CIRA) certification from the Association of Insolvency & Restructuring Advisors (AIRA) and the Certified Turnaround Professional (CTP) designation from the Turnaround Management Association (TMA) once you have more experience.
Also, if you have not done so, join WSO's 'The Restructuring Group.'
Also a good article from the Turn Around Management Association (TMA) on types of auctions and bidding:
http://www.turnaround.org/Publications/Articles.aspx?objectID=9562
High-Octane Auctions Drive Up 363 Sale Results by Rob Carringer
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