Asset Sales Committee

ABI Committee News

Volume 3, Number 1 / May 2006

In This Issue

Break-Up / Termination Fees

by: Ronald L. Rose, Brendan G. Best and Gina M. Capua
Dykema Gossett PLLC


The Impact of Insolvent Estates Arising from §363(B) Sales

Several standards exist with respect to the evaluation of break-up fees in bankruptcy asset sales. One standard uses the business judgment rule as its foundation. See In re Integrated Resources, Inc., 147 B.R. 650 (Bankr. S.D.N.Y. 1992) (court approved motion for order allowing debtor to agree to break-up fees), followed by, inter alia, In re Global Crossing Ltd., 295 B.R. 726 (Bankr. S.D.N.Y. 2003), and In re APP Plus, 223 B.R. 870, 1998 Bankr. LEXIS 1073 (Bankr. E.D.N.Y. 1998) (court approved break-up fee agreed to by the first offerer and trustee of chapter 11 estate), and rejected in In re America West Airlines, 166 B.R. 908 (Bankr. D. Ariz. 1994) (court denied break-up fee previously agreed to by the debtor and a prospective buyer). The court in Integrated Resources held that there are three questions for courts to consider when authorizing break-up fees.

Read the full article.

Minutes from Annual Spring Meeting

The Asset Sales Committee met jointly with Finance and Banking Committee, on April 22, 2006 at the Annual Spring Meeting. Presiding were Committee Co-Chairs David Peress and Weston Anson, together with Finance and Banking Committee Co-Chair, Peter Antoszyk.

Mr. Anson reviewed some of the committee initiatives over the past six months and noted the contributions made to those initiatives by specific members. Among the matters discussed were:

  • The continued progress toward completing the ABI Handbook on Intellectual Property. With assistance from editor Geoff Berman, the handbook is essentially complete and is expected to be published shortly.  
  • Rick Tilton advised the committee that he had received the go-ahead from ABI to generate a second edition of his Asset Sales Handbook and invited committee members with an interest in contributing to the book to contact him.  
  • The committee continues to solicit interest from its members to draft articles to be published in its e-newsletter, of which it has circulated several with the assistance of editors Gary Jacobson and Paul Forshee.
  • The committee listserve is up and running with the assistance of moderators Eric Anderson, Dov Frankel and Henry David.
  • The committee is soliciting ideas for educational topics that could serve as content for future committee meetings or regional conferences. Ideas should be filtered through the committee co-chairs.
On behalf of the committee, Mr. Anson extended thanks to all of the members who had contributed to the foregoing initiatives. He then introduced the panelists who were there to present the educational portion of the meeting. They were Racquel Palmer of KPS Funds in New York, Larry Halperin of Richards Spears Kibbe & Orbe in New York, Lawrence Gelber of Schulte Roth & Zabel LLP in New York, and Mr. Anson of CONSOR in La Jolla, Calif.

The panel discussion centered on the use of “loan-to-own” strategies by nontraditional lenders to distressed companies. They discussed some of the techniques being utilized to implement loan-to-own strategies and some of the concerns those strategies cause for borrowers and other interested parties. The written materials for the meeting were supplied by Asset Sales Committee Co-Chair David Peress from XRoads Solutions Group, LLC in New York, in the form of an article written by Mr. Peress and Thomas C. Prinzhorn, which was published in the April issue of the ABI Journal titled "Nontraditional Lenders and the Impact of Loan-To-Own Strategies on the Restructuring Process.” The written materials were included in the CD-ROM educational materials distributed at the Annual Spring Meeting.