What is a stalking horse bidder in bankruptcy?
A stalking-horse bid is an initial bid on the assets of a bankrupt company. The bankrupt company will choose an entity from a pool of bidders who will make the first bid on the firm’s remaining assets. The stalking horse sets the low-end bidding bar so that other bidders can not underbid the purchase price.
What is a stalking horse 363 sale?
Often, the section 363 sales process starts prior to the commencement of the target’s bankruptcy case. The target often will market its assets to potential purchasers outside of the bankruptcy process and then select the highest and best bid to serve as the “stalking horse” bid.
Is stalking horse bid legally binding?
Serving as a stalking horse bidder has some risk. For example, if no one shows up at the auction, the stalking horse may wonder if it overbid for the assets. Once the bankruptcy court approves the stalking horse agreement, it becomes binding on all parties and difficult, if not impossible, to renegotiate.
What is a stalking horse sale?
In the context of section 363 sales in bankruptcy, a stalking horse is a bidder used to set the purchase price floor so other bidders can know the minimum to bid for the target company. The opportunity to negotiate the basic contract terms and structure of the transaction and the bidding procedures.
What is a stalking horse candidate?
From Wikipedia, the free encyclopedia. A stalking horse is a figure used to test a concept or mount a challenge on behalf of an anonymous third party. If the idea proves viable or popular, the anonymous figure can then declare its interest and advance the concept with little risk of failure.
What happens after a 363 sale?
After the close of the bidding and announcement of the winning bidder, the court must approve the sale of the asset before it is transferred to the successful bidder. If there are parties that object to the sale, they must state the reasons for their objections and make their case to the bankruptcy court at this point.
Where does the phrase stalking horse come from?
The term stalking horse originally derived from the practice of hunting, particularly of wildfowl. Hunters noticed that many birds would flee immediately on the approach of humans, but would tolerate the close presence of animals such as horses and cattle.
How does a stalking horse bid work in bankruptcy?
The stalking horse’s bid offer serves as the reserve amount which sets the floor and prevents other investors from bidding below their proposed purchase price: in other words, it sets the value of assets at sale. It helps the company maximize the value of their assets and bring more money into the bankruptcy estate.
How are assets sold in a section 363 bankruptcy?
The Section 363 Sale process in bankruptcy is straightforward. The debtor, like any seller, first markets its assets to possible purchasers. Assuming one or more potential purchasers makes an offer to purchase the debtor’s assets, the debtor then selects what it considers the highest or best bidder to act as the “stalking horse” bidder.
How does the 363 sale bidding process work?
The 363 sale starts with the debtor marketing the organization’s assets to attract potential purchasers. If there are several interested purchasers, the debtor settles on the highest bidder to act as the stalking horse bidder. This bidder’s price works as the base price for the auction bids, and the other bidders will use this bid as a benchmark.
What are the limitations of a 363 sale?
Also, having several interested purchasers may complicate negotiations for the stalking horse bidder. Another limitation of a 363 sale is that, if the manner in which it is conducted does not conform to the requirements of the bankruptcy court, then the asset sales will not be approved by the court.
