Many, if not most, Chapter 11 cases result in one or more sale of estate assets outside of the ordinary course. And each such sale requires the debtor to obtain court approval before consummating such a sale. Many chapter 11 debtors, in fact, wind up selling substantially all of their assets as a going concern to a third party after obtaining court approval to do through the court’s approval of a 363 motion. This webinar explains what a 363 motion needs to include, the procedural requirements a debtor must satisfy to persuade a court to approve it, and the arguments that objecting parties may make in opposition. Importantly, this webinar puts a 363 motion into proper context relative to a Chapter 11 bankruptcy case as a whole. Part of the webinar series: THE NUTS & BOLTS OF BANKRUPTCY LAW 2022 See more at https://www.financialpoise.com/webinars/

2. 2
Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

3. 3
Thank You To Our Sponsors

4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
4

5. Meet the Faculty
MODERATOR:
Ashley Jericho – McDonald Hopkins LLC
PANELISTS:
David K. Bowsher - Balch & Bingham LLP
William S. Hackney - SmithAmundsen LLC
Thomas J. Salerno - Stinson LLP
5

6. About This Webinar
The Nuts & Bolts of a 363 Motion
Many, if not most, Chapter 11 cases entail one or more sale of estate assets outside of the ordinary
course. Each such sale requires the debtor to obtain court approval before consummating such a
sale. Many chapter 11 cases culminate in sale of substantially all the debtors’ assets as a going concern.
What considerations go into the sale process? What are the buyer’s concerns? What role does the court
play? This webinar looks under the hood, and explains how the 363 sale process works, how the parties
can use that process to achieve their own goals, the ways in which other parties can try to stand in the
way, what courts will typically require, and how the process will play out. A must-hear program for
anyone considering buying or selling a distressed business, or otherwise involved in distressed M&A.
6

7. About This Series
Nuts & Bolts of Bankruptcy Law 2022
Even as economists project a return to economic normalcy as the COVID 19 pandemic
recedes, many businesses have been crippled by decreased revenues, increased debt,
uncertain prospects and vaporized equity. Many distressed businesses that cannot heal on
their own will check into the hospital of Chapter 11 . . . or arrive at the door of the emergency
room before negotiating a cure. If you need to understand Chapter 11 – whether to avoid it or
learn how to harness its power – this program is for you. Designed for the corporate attorney,
litigator, business consultant, executive and others not already experienced in Chapter 11,
each episode in this Financial Poise webinar series takes a deep dive into one aspect of a
Chapter 11 bankruptcy case at a level that can be understood by the non-expert.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without background in these areas, yet also invaluable to seasoned attorneys, accountants, and other
professionals who need to refresh their understanding of this timely topic. Each episode brings you an engaging
conversation designed to entertain as it teaches, and may be viewed independently so that your knowledge will be
enhanced whether you attend one, some, or all episodes.
7

8. Episodes in this Series
#1: The Nuts & Bolts of a Chapter 11 Plan
Premiere date: 5/3/22
#2: The Nuts & Bolts of a Lift Stay Motion
Premiere date: 6/7/22
#3: The Nuts & Bolts of DIP Financing
Premiere date: 7/12/22
#4: The Nuts & Bolts of a 363 Motion
Premiere date: 8/16/22
#5: The Nuts & Bolts of Retention
Premiere date: 9/2/22
#6: The Nuts & Bolts of a First Day Hearing
Premiere date: 10/25/22
8

9. Episode # 4
Nuts & Bolts of a Section 363 Sale
9

10. Authority
⚫ Section 363 of the Bankruptcy Code
✓ Authority to sell bankruptcy estate assets
✓ Sale can be free and clear of liens
✓ Process is the key
⚫ [Excerpts provided starting at slide 21]
⚫ Fed. R. Bankr. P. 6004
⚫ Local Rules are often key

11. Process – Overview
⚫ Sale can be by public auction or private sale
⚫ Private Sale typical when entire business is sold
✓ Step One: Stalking Horse Bid
✓ Step Two: Counteroffers
✓ Step Three: Final Bid Opportunity
✓ Step Four: Court Approval
✓ Step Five: Closing (Appeal?)
11

12. Private Sales – Stalking Horse
⚫ Seller’s Perspective
✓ Set floor under sale price
✓ Best to sign APA before Chapter 11 Filing
✓ Minimize reps and warranties
✓ No holdbacks or escrows
✓ Get substantial deposit
12

13. Private Sales – Stalking Horse
⚫ Buyer’s Perspective
✓ Get head start on due diligence
✓ Customize APA for buyer’s needs
✓ Get break-up fee if lose the deal
✓ Set parameters for sale process:
➔ Deadline for counterbids
➔ Minimum overbid amount
➔ Other requirements for counterbids
➔ How final bids will work
13

14. Private Sales – Stalking Horse
⚫ Assets may include contracts/leases
✓ Section 365 generally permits assignment
✓ Intellectual property licenses can be tricky
⚫ Stalking horse will often be secured lender with lien on all assets
✓ Lender will want to credit bid
✓ Section 363(k) protects credit bid rights [see slide 25]
✓ Does lender want to maximize value . . . or acquire the assets for itself?
14

15. Private Sales - Counteroffer
⚫ Two ways to handle sale procedures:
✓ Get sale procedures order up front
✓ Wait to get court approval at sale hearing
➔ court might say no
➔ seller and buyer both at risk
⚫ Solicitation process
⚫ Due diligence
⚫ Confidentiality
15

16. Private Sales - Counteroffer
⚫ Counterbid requirements
✓ Minimum overbid amount
✓ Deposit
✓ Proof of financial capacity
✓ Same assets?
✓ Same terms as APA?
⚫ What if counterbid is made after the deadline?
16

17. Private Sales – Final Bid Opportunity
⚫ Two basic approaches:
✓ Open cry auction
✓ Single sealed bid
⚫ Agreements among bidders
✓ May help maximize sale price
✓ May be impermissible collusion
✓ Consequences of collusion [Section 363(n) – see slide 27]
17

18. Free and Clear
⚫ Section 363(f) permits sales free and clear of “interests” [see slide 24]
✓ The clear case: Liens
✓ Rights of first refusal?
✓ Use restrictions?
✓ IP licenses?
✓ Successor liability?
18

19. Free and Clear
⚫ Notice plays a critical role
✓ Seller gives the notice
✓ Buyer (largely) bears consequences of failure of notice
⚫ Must meet one of five requirements under 363(f)
✓ Lienholder consent is common
✓ Can sell without consent if lienholder is over-secured
✓ Selling without consent can be problematic where lienholder is under-secured
19

20. Default
⚫ What if the winning bidder refuses to close?
✓ Deposit
➔ May be liquidated damages
➔ May be credit against actual damages
✓ Reselling the assets
➔ Sell to next highest bidder?
➔ Court may approve in advance
20

21. Appeal
⚫ Disaster for estate if buyer refuses to close because someone has appealed
⚫ Statutory remedy: Section 363(m) [See slide 26]
✓ Once closed, sale cannot be undone by appellate decision
✓ Appeal dismissed as moot
✓ Appellant must get stay before closing
➔ Must show likely success of appeal
➔ May have to post bond
21

22. 11 U.S.C. § 363 (selected excerpts)
(b)
(1) The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary
course of business, property of the estate . . . .
(c)
(1) . . . [T]he trustee may enter into transactions, including the sale or lease of property of
the estate, in the ordinary course of business, without notice or a hearing, and may use
property of the estate in the ordinary course of business without notice or a hearing.
(2) The trustee may not use, sell, or lease cash collateral under paragraph (1) of this
subsection unless—
(A) each entity that has an interest in such cash collateral consents; or
(B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance
with the provisions of this section.
22

23. 11 U.S.C. § 363 (selected excerpts)
(f) The trustee may sell property under subsection (b) or (c) of this section free and clear of
any interest in such property of an entity other than the estate, only if—
(1) applicable nonbankruptcy law permits sale of such property free and clear of such
interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than
the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money
satisfaction of such interest.
23

24. 11 U.S.C. § 363 (selected excerpts)
(k) At a sale under subsection (b) of this section of property that is subject to a lien that
secures an allowed claim, unless the court for cause orders otherwise the holder of such
claim may bid at such sale, and, if the holder of such claim purchases such property, such
holder may offset such claim against the purchase price of such property.
24

25. 11 U.S.C. § 363 (selected excerpts)
(m) The reversal or modification on appeal of an authorization under subsection (b) or (c) of
this section of a sale or lease of property does not affect the validity of a sale or lease under
such authorization to an entity that purchased or leased such property in good faith, whether
or not such entity knew of the pendency of the appeal, unless such authorization and such
sale or lease were stayed pending appeal.
25

26. 11 U.S.C. § 363 (selected excerpts)
(n) The trustee may avoid a sale under this section if the sale price was controlled by an
agreement among potential bidders at such sale, or may recover from a party to such
agreement any amount by which the value of the property sold exceeds the price at which
such sale was consummated, and may recover any costs, attorneys’ fees, or expenses
incurred in avoiding such sale or recovering such amount. In addition to any recovery under
the preceding sentence, the court may grant judgment for punitive damages in favor of the
estate and against any such party that entered into such an agreement in willful disregard of
this subsection.
26

27. About the Faculty
27

28. About The Faculty
Ashley Jericho - ajericho@mcdonaldhopkins.com
Ashley is an associate in the Strategic Advisory and Restructuring Department at McDonald
Hopkins LLC. She has over 10 years of insolvency experience, including representing
consumer and business debtors, creditors and trustees in bankruptcy proceedings, contested
matters and adversary proceedings. Before joining McDonald Hopkins, she gained
experience as a shared law clerk at the United States Bankruptcy Court for the Eastern
District of Michigan, law clerk to Hon. Walter Shapero (ret.) in the United States Bankruptcy
Court for the Eastern District of Michigan, and as an associate attorney at a metro-Detroit
bankruptcy and litigation firm. Ashley earned her J.D., magna cum laude, from Western
Michigan Cooley Law School in 2008, where she served as the associate editor of the
Thomas M. Cooley Law Review. She received a B.A. in political science from Washington
and Jefferson College in 2004.
28

29. About The Faculty
David K. Bowsher- dbowsher@balch.com
David K. Bowsher is a partner in the Birmingham and Houston offices of Balch & Bingham LLP. His
practice focuses on mergers and acquisitions, including those involving troubled companies, on corporate
restructuring and bankruptcy issues, and on oil and gas matters.
Previously, he served as Acting General Counsel and Deputy General Counsel of the U.S. Department of
Commerce in President George W. Bush’s Administration. During that time, he advised senior U.S.
Government officials on a wide variety of issues, including providing financial assistance to distressed
industries (e.g., the automotive and steel industries), foreign direct investment, Congressional oversight
and investigations, coastal development litigation (particularly oil and gas-related developments), export
control licensing and enforcement, and Internet governance. He also co-led U.S. engagement with the
People’s Republic of China on transparency in government as part of the Strategic Economic Dialogue
and led U.S. participation in the U.S.-China Legal Exchange as part of the Joint Commission on
Commerce and Trade.

30. About The Faculty
William S. Hackney - WHackney@salawus.com
Clients often come to Bill in the midst of a potential financial calamity. Whether the call comes from
company management or one of the dozens of financial institutions he represents, each of these financial
crises comes with its own unique set of problems. Knowing that Bill will create a tailored approach to
address those problems provides comfort. Bill is a trusted restructuring counselor. He helps his clients
analyze and resolve their financial issues, representing debtors, lenders, secured creditors, creditors'
committees and trustees, among others, in all manners of chapter 11 and chapter 7 cases as well as out-
of-court workouts and restructurings. Bill assists financial institutions and cannabis-related businesses on
the interaction between state cannabis laws and federal banking and bankruptcy laws. He also acts as
outside bankruptcy counsel to a number of corporations and provides general business counseling in
distressed situations, and represents a number of his clients in their FDCPA, FCRA, and similar
consumer finance defense claims. Bill strives to find the right customized strategy for each client, knowing
that it is the key to a successful resolution. Bill is on the panel of Chapter 7 Trustees for the Northern
District of Illinois and in that role is a fiduciary responsible for the preservation, liquidation, and distribution
of assets in both consumer and commercial chapter 7 cases.
30

31. About The Faculty
Thomas J. Salerno - thomas.salerno@stinson.com
Thomas Salerno is a member of the financial restructuring practice at Stinson Leonard Street. He has
been involved in restructurings in the United States, the United Kingdom, Germany, France, Switzerland
and the Czech and Slovak Republics. In addition, he teaches Comparative International Insolvency at the
University of Salzburg. Tom was named as one of 12 Outstanding Bankruptcy Attorneys in 1998 and
2000 by Turnarounds & Workouts, a newsletter published by Beard Group, Inc. in Washington DC, and is
a member of the select group of insolvency professionals listed in the K&A Restructuring Professionals
Registry. He has been listed in The Best Lawyers in America since 1993 and was selected by his peers
for inclusion in Southwest Super Lawyers, a distinction honoring the top 5 percent of lawyers in the
region. In 2009, Tom was selected as Best Lawyers’ Phoenix Bankruptcy and Creditor-Debtor Rights
Lawyer of the Year and was one of three Arizona-based lawyers to be listed in The International Who’s
Who of Insolvency & Restructuring Lawyers. He is rated AV by Martindale-Hubbell’s rating system.
To read more, go to https://www.financialpoise.com/webinar-faculty/tom-salerno/
31

32. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
32

33. Commercial Bankruptcy Litigation is a must-have
resource for any non-bankruptcy attorney who is
involved in a chapter 11 bankruptcy case. It is also
a handy “take on the road” treatise for the
experienced chapter 11 professional. This 2,000-
plus page treatise, updated yearly, and with
contributions from some of the country's most
respected practitioners from top firms across the
U.S., covers topics from general bankruptcy and
procedure to appeals.
Commercial Bankruptcy Litigation, 2d, 2022 ed.
eBook available through Thomson and Reuters and Amazon
33

34. Strategic Alternatives For And Against Distressed
Businesses, 2022 ed.
Strategic Alternatives for And Against
Distressed Businesses is one of a kind. It is
the only resource that provides comprehensive
state-by-state comparisons of assignments for
the benefit of creditors and receiverships. This
alone makes the book a must-have for every
insolvency professional.
“If you can only own one book about corporate restructuring
and insolvency, there is a compelling case that this should
be the one.”
eBook available through Thomson
and Reuters and Amazon
34

36. 36

37. ABOUT DailyDAC
DailyDAC.com is the leading source of
information about assignments, article 9,
bankruptcy, receiverships, out-of-court
workouts and vulture investing, designed
for business owners and vulture
investors.
Visit us at www.dailydac.com.
Premium Public Notice Service
DailyDAC’s Premium Public Notice Service helps market
asset sales on behalf of fiduciaries (e.g., Chapter 11 debtors-
in-possession and committees, trustees, receivers,
assignees), secured lenders selling collateral under UCC
Article 9, and auctioneers to a very large and self-selected
group of potential bidders and their advisors. The Service
also assists with noticing other events, deadlines, and
milestones – including tombstones and other press releases.
Our free weekly newsletter, DailyDAC contains our
latest bankruptcy article, current Public Notices and all
opportunistic deals added to our proprietary database
that week. Sign up at:
https://www.dailydac.com/dacyak-weekly-newsletter-signup/

38. About Financial Poise
38
Financial Poise™ has one mission: to provide
reliable plain English business, financial, and legal
education to individual investors, entrepreneurs,
business owners and executives.
Visit us at www.financialpoise.com
Our free weekly newsletter, Financial Poise
Weekly, updates you on new articles published
on our website and Upcoming Webinars you
may be interested in.
To join our email list, please visit:
https://www.financialpoise.com/subscribe/