Bankruptcy
Section 363 Auctions - When the Stalking Horse Stalks Out
In 2002, Hangley Aronchick Segal & Pudlin represented a company that provided mental wellness and substance abuse programs and services to corporate clients to promote healthy and productive work environments. As a result of its serious financial problems and mounting debt, its managers determined that the company’s only alternative to liquidation would be to sell substantially all of its assets under Section 363 of the Bankruptcy Code. However, it was imperative that the sale be consummated as quickly as possible in order to maximize the value of its employer and provider contracts.
As its bankruptcy counsel for the company, our firm obtained an expedited sale process for the sale of the company to a “stalking horse” bidder. However, days before the auction was scheduled to take place, the stalking horse got cold feet and suddenly withdrew from the auction leaving the company scrambling for alternatives. We quickly identified and encouraged several other interested bidders to place bids before the bid deadline expired. The absence of the stalking horse bidder ultimately evened the playing field for the other bidders and resulted in a final offer of cash and an earn-out which was more than twice what the stalking horse bidder had initially offered. With the additional sale proceeds, the company was able to completely pay off its secured debt and increase the payout to its unsecured creditors.
As its bankruptcy counsel for the company, our firm obtained an expedited sale process for the sale of the company to a “stalking horse” bidder. However, days before the auction was scheduled to take place, the stalking horse got cold feet and suddenly withdrew from the auction leaving the company scrambling for alternatives. We quickly identified and encouraged several other interested bidders to place bids before the bid deadline expired. The absence of the stalking horse bidder ultimately evened the playing field for the other bidders and resulted in a final offer of cash and an earn-out which was more than twice what the stalking horse bidder had initially offered. With the additional sale proceeds, the company was able to completely pay off its secured debt and increase the payout to its unsecured creditors.