Hon. C. Ray Mullins United States Bankruptcy Court – Northern District of Georgia Atlanta, GA...
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Transcript of Hon. C. Ray Mullins United States Bankruptcy Court – Northern District of Georgia Atlanta, GA...
Hon. C. Ray MullinsUnited States Bankruptcy Court – Northern District of Georgia
Atlanta, GA
Shaunna D. Jones, Esq.Willkie Farr & Gallagher, LLP
New York, NY
Ted Gavin, CTPGAVIN/SOLMONESE LLC
Wilmington, DE
Corali Lopez-CastroKozyak Tropin & Throckmorton
Coral Gables, FL
2015
How to Win (or Lose)Bankruptcy Auctions
FontainebleauMiami Beach
• Debtor is a Hotel/Condominium complex– Debtor executed NDAs with interested parties
• These parties want more information• Parties will be provided access to due diligence data
– Parties can contact Debtor’s CRO to discuss due diligence or make a proposal
– Hotel Association may participate in such discussions or have their own discussions with interested parties• Hotel Association will notify CRO of any discussions it has with
interested parties
Hypothetical
2
• Debtor may employ or announce additional procedural rules at auction to obtain highest and best bid– After consultation with Hotel Association– Must not be materially inconsistent with auction
procedures approved by the Court– Rules or modifications must be disclosed to each Qualified
Bidder at the auction
Hypothetical
3
• Identification of the Prevailing Bidder– The auction continues until Debtor identifies highest and best bid
• Considering Hotel Association’s preference and Bidder’s relevant experience• Total consideration (and form of consideration) to be received by Debtor’s
creditors • Bidder’s ability to close and timing of closing• Potential impact of any requested modifications to Purchase Agreement or plan• Net benefit to creditors of each proposal
• Debtors shall announce the material terms of winning bid and basis for determining total consideration and benefit
Hypothetical
4
• Seeking Court Approval– Tension between rigid process and absolute auction– Establishes even procedural playing field– Sets universal “ground rules”– Ensures parity among parties– Ensures an open and transparent process
• Helpful when seeking a good-faith finding• Necessary when looking to determine market’s perception of
value
Auction Procedures
5
• Managing Auctions with Multiple Parties– Differing Objectives/Perceptions of Value of Bidders– Differing Value of Asset Types to Different Purchasers
• Asset Lots• Intellectual property• Regional Segments/Product Segments/Business Lines
– Differing Bid Structures• Flash Bidding• Cluster Bidding• Lot Bidding
Auction Procedures
6
• Dealing with Credit Bids– Does credit bidding chill bidding?
• Stalking Horse Bidders– Shadow Auction before the auction– Selection Criteria
• Certainty of closing vs Certainty of winning
• Naming a Backup Bid
Auction Procedures
7
• Managing the Due Diligence Process• Consultation Rights
– Bankruptcy Math 101: Consultation ≠ Control– Creditors’ Committee
• Role of the Committee• Committee as Fiduciary
– Secured Lender– Associations, Unions, and other Interested Parties– Non-Fiduciaries
Auction Procedures
8
• Objections by Parties in Interest– General Officious Intermeddlers
• Sale of Customer Data/Personally Identifiable Information– Sec. 332 – Consumer Privacy Ombudsman– Protections limited to information provided
TO THE DEBTOR• Hotel exception
Auction Procedures
9
• Basic Auction Logistics– Who can attend?
• Aloha Airlines example– How will bids be received, analyzed and compared?– Dealing with non-conforming bids– Time Limits on Making Bids/Overbids
• Time limits on bidder to bid/overbid• Time limits on Debtor to accept bid
• Debtor’s Right to Modify Auction Procedures
The Auction
10
• Valuing Assumed Liabilities / Non-Cash Consideration– Involuntarily Assumed Liabilities
• Tort Claims/Successor Liability• Environmental Claims• Labor Claims
– Voluntarily Assumed Liabilities• Trade Claims• Other
The Auction
11
• Reopening the Auction– Limitations on objection by non-successful bidders– Objections or support of key constituencies that
auction was run according to approved procedures– Lack of good-faith; collusion
The Auction
12
• Reopening the Auction– Hallmarks supporting reopening
• Substantial overbid• Material flaws in the auction process or deviations from court-
approved procedures• Party seeking to reopen must have support of other key
parties-in-interest– ABI Commission Recommendations– Use of Sale Procedures as Preventative/Protective
measure
The Auction
13
• When is “highest” not necessarily “best”?– Preservation of “Mission”– Litigation Concerns– Continued Employment– Third-Party Consent– Certainty & Simplicity– Risk Reduction– Cut a Deal with the Committee
The Auction
14
• Credit Bids– Post-Fisker & Free Lance Star– Provision for payment of Administrative claims?– Credit Bids during Lien Challenge Period– Ownership dispute or other controversy pending– Complications for junior/subordinated secured creditors
• Are auctions messier than they were ten years ago?
The Auction
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