363 Bankruptcy asset sale and Analyzing Bids in the auction process

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!

Comments (7)

 
May 28, 2012 - 10:57pm

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.

 
May 28, 2012 - 10:43pm

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.'

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