Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Opportunities and Best Practices for Lenders In Financing Distressed Business Acquisitions
As distressed M&A activity inevitably heats up, strategic buyers and equity sponsors that have sat on the sideline for an extended period of time will likely have expanding interest in purchasing viable, but over-leveraged, businesses that are being sold out of bankruptcy. The benefits of buying the business of a Chapter 11 debtor, such as obtaining a court order explicitly limiting assumed liabilities and containing other buyer protections, are relatively well known. This article focuses on the financing opportunities this activity will create for lenders, highlights the benefits of financing bankruptcy acquisitions, and identifies some potential challenges and best practices to ensure that lenders minimize any risks and receive maximal protection for themselves.
Bankruptcy Sales
For in-court distressed transactions, a debtor typically proposes a buyer to serve as a "stalking-horse" or platform bidder to establish a price floor and then conducts a marketing process to solicit competing bidders to participate in an auction to obtain the highest, or otherwise best, sale price. In exchange, the stalking horse generally negotiates the parameters of the sale process and certain buyer protections, including a break-up fee. Where it is not able to secure a stalking horse, the debtor often runs a similar bid solicitation process, with the hope of generating the interest of multiple bidders, so it can conduct an auction and maximize value. The debtor and its advisors, in consultation with the primary creditor constituencies, select the winning bidder, subject to the presiding bankruptcy court's review and approval. The entire sale process can often be completed in 30-60 days and does not require the resolution of any inter-creditor or other ancillary issues necessary to complete the Chapter 11 process.
Lenders may have the opportunity to finance a stalking-horse bidder or a potentially-competing bidder. Given certain bankruptcy protections discussed below, these opportunities may actually be more attractive for lenders than non-bankruptcy financings. Any potential challenges can be mitigated by following the best practices described below.
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?
The Benefits of Blockchain for e-Discovery and Data Preservation
As businesses across various industries increasingly adopt blockchain, it will become a critical source of discoverable electronically stored information. The potential benefits of blockchain for e-discovery and data preservation are substantial, making it an area of growing interest and importance.