Getting the money before order approving sale of
Posted: Mon Aug 12, 2013 11:06 am
I see two issues here: 1) a sale of estate property outside the ordinary
course of business - section 363; and 2) unsecured debt outside of the
ordinary course of business - section 364.
The DIP has most of the powers of the trustee in a chapter 11 case. Where
the code refers to "trustee" the DIP can normally exercise this power.
363(b)(1) requires notice and a hearing unless the sale is in the ordinary
course of business. There is a two part test for deciding if the sale is
in the "ordinary course of business" -
1) vertical dimension - the court views the transaction from the
perspective of a hypothetical creditor and asks whether the transaction
would impose economic risks on that creditor beyond those reasonably
expected in light of the debtor's prepetition business activities;
2) horizontal dimension - the court looks more broadly at the commercial
context of the debtor's business and asks whether the postpetition
transaction is of a type that may be expected in a business similar to the
debtor's.
The standard for approval by the court of a sale outside the ordinary
course of business is that the transaction serve the best interest of the
estate and further the legitimate ends of the bankruptcy. This is a fact
based determination.
Section 363 is meant for extraordinary dealings with estate property prior
to confirmation of a chapter 11 plan. If there is no good reason to make
the sale prior to confirmation, the court may deny the motion.
The post was migrated from Yahoo.