Bad precedent

18 June 2009 By Lauren Silva

Chrysler s restructuring included a swift asset sale under section 363 of the bankruptcy code. Now others, like Eddie Bauer, are trying the same shortcut process. But wider use of section 363 would sidestep creditors rights. Lauren Silva Laughlin explains the dangers.

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Eddie Bauer filed for Chapter 11 bankruptcy protection on June 17. The company is pursuing a sale process under section 363 of the bankruptcy code. It has entered into an asset purchase agreement with CCMP Capital Advisors. CCMP will buy the company's assets for $202m in cash, with working capital and similar adjustments.

On June 15, a bankruptcy court in Arizona ruled that hockey team Phoenix Coyotes could not be sold to a Canadian billionaire. The judge said that it was impossible to sort through all the issues of the sale before a June 29 deadline for the sale to close.

Delphi said on June 1 that it planned to emerge from bankruptcy through a sale of much of its US and nonUS business to Parnassus Holdings II, LLC, an affiliate of Platinum Equity, with the assistance of GM funding. On June 9, lawyers for Delphi's bankruptcy lenders objected to the plan. The next day, Judge Robert Drain ruled that the car parts maker should conduct an auction and provide more details about its proposed sale.

The US Supreme Court on June 8 briefly delayed the sale of bankrupt Chrysler to Fiat and others to consider creditors' objections to the deal, but then removed its stay allowing the deal to go ahead.

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