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March 06, 2017

Sale That Provides No Recovery for Junior Lienholders Approved

 Philadelphia and Wilmington partner Andy Kassner and associate Joe Argentina published an article in The Legal Intelligencer titled, “Sale That Provides No Recovery for Junior Lienholders Approved.” The article explores a recent ruling that addresses whether a debtor can sell property free and clear of liens if the purchase price does not meet or exceed the face amount of the liens. Section 363 of the Bankruptcy Code outlines the conditions for these sales out of the ordinary course of business, but courts have issued inconsistent rulings on this issue.

In In re: Bay Circle Properties, LLC, et al., Case No. 15-58440-WLH (Bankr. N.D. Ga. February 14, 2017) the U.S. Bankruptcy Court for the Northern District of Georgia held that it could approve a sale even if the price was less than the face amount of the liens. The court’s opinion noted a split among bankruptcy courts on the concept of “value” in Section 363(f)(3), including Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25 (BAP 9th Cir. 2008), which held that in order to comply with Section 363(f)(3), the purchase price must meet or exceed the face amount of the liens against the property being sold. Other courts have reached a different conclusion, and held that the sale proceeds need only meet or exceed the value of the liens as determined by the Bankruptcy Court.

In their analysis, Andy and Joe said the Clear Channel decision may have to be adjudicated further, and until that time, “practitioners will need to confirm how courts are addressing this matter in the appropriate jurisdiction.”

Read “Sale That Provides No Recovery for Junior Lienholders Approved.”

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