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Vol 12, Num 3 l November 2015

Asset Sales

► In This Issue:

In re ICL Holding Co., Inc.: Third Circuit Upholds Escrow for Professionals and Settlement Sum Directly to General Unsecureds by 363 Purchaser over Objection of Administrative Claimant

ABI

Dawn M. Cica
Fox Rothschild, LLP
Las Vegas

ABI

Jason J. Zummo
Fox Rothschild, LLP
Las Vegas

In September 2015, the U.S. Court of Appeals for the Third Circuit issued an opinion in In re ICL Holding Co. Inc. that further reinforces the ability to use § 363 sales and settlements to resolve chapter 11 cases.

Factual Background

In 2012, Texas-based LifeCare Holdings, Inc. and its affiliated debtors (collectively, “the debtor”) were struggling financially, carrying a $484 million debt load, of which approximately $355 million was secured. A group of secured lenders offered to purchase all of the assets of the debtor (including cash) for a $320 million credit bid (out of the $355 million of debt that they were then owed), plus $1.8 million in cash to pay the legal and accounting fees of the debtor and the unsecured creditors’ committee, as well as the debtor’s wind-down costs. The cash was to be put into an escrow account, and any unused amounts were required to be returned to the secured lenders. In December 2012, the debtor entered into an asset-purchase agreement (APA) with its secured lenders; the next day, the debtor filed for bankruptcy.
» Read More

Six Serious Pitfalls to Pursuing a Single Suitor Strategy — And Four Common Reasons Why Companies Do It Anyway

ABI

Kenneth M. Mann
Heritage Equity Partners
Easton, Md.

Your client or borrower is a troubled business that desperately needs to find a buyer or new money, and fast. Somebody suggests that your client/borrower hire an intermediary, but the company already has one “offer” (for purchase, refinance, investment), so is reluctant to hire an investment banker to run a thorough process to find other possible solutions. We have all seen that horror movie, so we must advise our clients of the pitfalls of their single-suitor, single-solution approach:

  1. The company is making its decision in a vacuum. Without a competitive process, how will management know it got the best deal? How can you choose a type of transaction (sale vs. refinance, for example), let alone the best suitor for that type of transaction, without knowing what all of your options are?
    » Read More
Credit-Bidding Book

Pick up a copy of Credit Bidding in Bankruptcy Sales, available now in the ABI bookstore, which provides practitioners with the information that they need to know when reviewing credit agreements, debtor-in-possession financing orders and sale orders related to credit bidding.

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