BUT, states that a is valued at the value of the § 506(a) lien … property (economic value, NOT face value), AND extent beyond that is an unsecured claim… AND, sale price ($40M) IS greater than (economic) value of … property (approx. $25M) OK if holder of interest could be compelled, § 363(f)(5) sale free and clear in legal/equitable proceeding, to accept $$ satisfaction of interest IS a legal proceeding) would have compelled C2 to accept JF economic ($$) value of (again, $0)… BUT, again, does TD2 PW NOT discuss this… though, if this interpretation were followed, then § 363(f)(5) … would render unnecessary (surplusage) § 363(f)(3) Lesson learned from do NOT hold (b/c junior may PW free and clear lien NOT be extinguished, BUT, rather, MAY become senior on property)… lien instead, obtain relief from foreclose, AND wipe out junior automatic stay, interests Goal/policy #1 provide incentive to create best possible price for market… BUT, in C1’s efforts (as providing PW, horse” bidder, “stalking go unrewarded administrative carve-out) Goal/policy #2 sell property quickly and proceed w/ administration of estate (as per NOT even litigation over a bona fide dispute is § 363(f)(4), supposed to hold up sale of property)… BUT, in protracted litigation PW, keeps title to property in flux Other issues re: sales free and clear… At auction of (which estate will NOT prosecute), horse” “stalking outbid by defendant to said claim unresolved whether this is a sale bidder (as per OR settlement of claim (which must comply w/ settlement § 363(f)) approval procedure) sells entire product line to new entity MAY DIP product line exception allow plaintiff (injured by defective product made by to bring product DIP) liability claim against new entity Voting… Assume C-lender is owed $1M, on property worth $800K has $200K TD (unsecured claim)… whereas, all other unsecured (trade) Cs owed deficiency $100K (combined)…
… BUT, § 506(a) states that a lien is valued at the value of the property (economic value, NOT face value), AND extent beyond that is an unsecured claim… … AND, sale price ($40M) IS greater than (economic) value of property (approx. $25M) § 363(f)(5) sale free and clear OK if holder of interest could be compelled, in legal/equitable proceeding, to accept $$ satisfaction of interest JF IS a legal proceeding) would have compelled C2 to accept economic ($$) value of TD2 (again, $0)… BUT, again, PW does NOT discuss this… … though, if this interpretation were followed, then § 363(f)(5) would render § 363(f)(3) unnecessary (surplusage) Lesson learned from PW do NOT hold free and clear (b/c junior lien may NOT be extinguished, BUT, rather, MAY become senior lien on property)… instead, obtain relief from automatic stay, foreclose, AND wipe out junior interests Goal/policy #1 provide incentive to create best possible price for market… BUT, in PW, C1’s efforts (as “stalking horse” bidder, providing administrative carve-out) go unrewarded Goal/policy #2 sell property quickly and proceed w/ administration of estate (as per § 363(f)(4), NOT even litigation over a bona fide dispute is supposed to hold up sale of property)… BUT, in PW, protracted litigation keeps title to property in flux Other issues re: sales free and clear… At auction of (which estate will NOT prosecute), “stalking horse” bidder outbid by defendant to said claim unresolved whether this is a sale (as per § 363(f)) OR settlement of claim (which must comply w/ settlement approval procedure) DIP sells entire product line to new entity product line exception MAY allow plaintiff (injured by defective product made by DIP) to bring product liability claim against new entity Voting… Assume C-lender is owed $1M, TD on property worth $800K has $200K deficiency (unsecured claim)… whereas, all other unsecured (trade) Cs owed $100K (combined)…
Bankruptcy_Schechter-Fall-2009.docx