Note from the Editor
This quarter’s Asset Sales Committee Newsletter ranges from the practical to the scholarly. David Linn of Oak Point Partners provides real-life examples of the value that can be derived from seemingly stale accounts receivable, and provides alternative strategies for delegating their collection. Mark Lichtenstein of Buchanan Ingersoll focuses on the increasing use of §363 sales to transfer substantial business assets at the inception of chapter 11 cases, and canvasses the law on challenging those sales as collusive or unfair to disappointed bidders.
As we begin to practice under BAPCPA, we will soon learn whether its amendments to chapter 11 practice will push more cases to early liquidation. Please share your experiences and insights into this new mode of practice by publishing them in this newsletter. Telephone or e-mail me with your ideas or submissions.
Gary S. Jacobson
Herold and Haines P.A.
Tel. (908) 647-1022 - ext. 117
gjacobson@heroldhaines.com
Generating Cash from Hard-to-monetize Intangible Assets
Part I: Written-Off Commercial Receivables
By: David Linn
Oak Point Partners; New York
This article is the first in a series about how bankruptcy trustees and advisors can create cash from assets that have traditionally been difficult to monetize. This installment focuses on generating cash from both highly-aged and previously written-off commercial receivables. Subsequent articles in the series will focus on creating cash from other intangible assets such as small and medium-sized preference actions, default judgments stemming from unsatisfied preference actions, and other litigation claims.
Introduction to the Opportunity
Faced with a financially distressed company or bankruptcy estate, executives and advisors are well aware that the company’s fresh accounts receivables can be a source of quick liquidity. As we all know, many of those are good candidates for asset-based lending or factoring firms that will provide limited near-term liquidity.
The Increasing Deployment of §363 Sales at the Inception of Chapter 11 and Issues of Collusion Related Thereto
By: Mark Lichtenstein
Buchanan Ingersoll PC; New York
The sale of a debtor's assets outside of a confirmed reorganization plan is accomplished pursuant to §363(b) of the Bankruptcy Code. There has traditionally been tension within the courts when a proposed §363 sale involves the selling of all or substantially all of a debtor's assets, or a sale is proposed outside such debtor's ordinary course of business. Courts have historically viewed §363 sales of this nature as sub rosa plans or defacto plans (i.e., transactions that seek to avoid the safeguards of the plan-confirmation process and/or significantly impact the terms of any future reorganization plan). The selling or leasing of business assets not in the ordinary course of business and prior to confirmation of a reorganization plan is a red flag to courts that such transactions may constitute a sub rosa plan.
Agenda for the 2005 Winter Leadership Conference
This program will focus on the impact of BAPCPA on §363 sales. The program will be led by Kit Weitnauer of Alston & Bird LLP in Atlanta, Robert Brady of Young Conaway Stargatt & Taylor LLP in Wilmington, Del. and Jeffrey Levitan of Proskauer Rose LLP in New York. The program will focus on current §363 practices and provide insight, guidance and other thoughts about how such practices may change as a result of the recent amendments to the Code.