672 B.R. 173
Bankr. S.D.N.Y.2025Background
- Giftcraft Ltd. and affiliated debtors defaulted on secured loans, leading to the Royal Bank of Canada seeking receivership in Canada under the Bankruptcy and Insolvency Act.
- On May 14, 2025, KPMG Inc. was appointed as Receiver of Giftcraft’s assets by the Ontario Superior Court, with broad authority to sell property.
- The assets included U.S. property, and a Chapter 15 case in the Southern District of New York recognized the Canadian proceeding as a foreign main proceeding.
- The Receiver initiated a robust marketing process for the assets, contacting 18 potential buyers and receiving two offers; CTG Brands Inc. (via a new entity) ultimately provided the highest and best bid.
- The Receiver, as Foreign Representative, sought U.S. Bankruptcy Court approval under Chapter 15 and Section 363 for the sale of U.S. assets, as well as the assumption and assignment of executory contracts.
- No objections to the sale were filed before the deadline, and all procedural requirements, including notice, were met.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Recognition of Canadian Vesting Order in U.S. | Recognition and enforcement required | None (uncontested) | Canadian Approval and Vesting Order recognized and enforced as consistent with U.S. law |
| Approval of Asset Sale Under § 363 | Sale maximizes value; meets § 363(b) | None (uncontested) | Sale of U.S. assets approved as a sound exercise of business judgment under § 363(b) |
| Sale Free & Clear of Liens (§ 363(f)) | Lienholder consents; notice adequate | None (uncontested) | Sale free and clear of liens approved due to creditor consent and lack of objections |
| Assumption & Assignment of Executory Contracts | Assumption benefits estate; cure costs handled | None (uncontested) | Approved; requirements of § 365 met: business judgment sound, cure costs split, consent required |
Key Cases Cited
- In re Fairfield Sentry Ltd., 768 F.3d 239 (2d Cir. 2014) (Clarifies that § 363 applies to the sale of U.S. assets in recognized foreign proceedings)
- In re Chateaugay Corp., 973 F.2d 141 (2d Cir. 1992) (Sets business judgment standard for asset sales)
- Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2d Cir. 1983) (Requires articulated business justification for § 363 sales)
- Licensing by Paola v. Sinatra (In re Gucci), 126 F.3d 380 (2d Cir. 1997) (Defines "good faith" standard for bankruptcy purchasers)