453 B.R. 132
Bankr. S.D.N.Y.2011Background
- GSC and affiliates filed chapter 11; Trustee seeks approval of a sale under APA 1 and APA 2 to Black Diamond entities and related side letters.
- Auction process in 2010–2011 yielded a highest bid from BD Joint Bid; Non-Controlling Lenders consented to joint bidding.
- Prepetition secured debt included a $193.5M term loan and a $10.2M swap; collateral granted to a Collateral Agent for the lenders.
- Eckert and Frank had related-party arrangements with Black Diamond, including consulting and employment agreements.
- Trustee concluded the sale would maximize estate value and that pursuing a plan would risk value erosion and delay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the sale was a valid offer and not a sub rosa plan | NCL argues the BD Joint Bid was terminated; thus sale lacks grounding | GSC/Trustee contends Winning Bid remained open and APA 1/Side Letter coupled with joint bid were valid | Sale valid; Winning Bid remained open and allocations governed by consented procedures |
| Whether there was a legitimate business justification for a §363 sale over a plan | NCL asserts plan process would yield better value for creditors | Trustee demonstrated high risk of plan failure and potential value deterioration; sale expedited liquidity | Good business justification found; 363 sale appropriate to maximize estate value |
| Whether the plan could be confirmed and 1129 requirements met | NCL contends plan would be unconfirmable and crammed down improperly | Court considered likelihood of plan confirmation poor and chose sale to preserve value | Plan unlikely to be confirmed in a reasonable time; sale approved |
| Whether sale proceeds and allocation would improperly evade plan protections | NCL claims sub rosa aspects and improper allocation to unsecureds | Sale structure preserves absolute priority and allocations reflect lien priority; any dispute reserved for state court | Sale not a sub rosa plan; proceeds and allocations compliant with law; allocation issues reserved for state court |
Key Cases Cited
- In re Chrysler LLC, 576 F.3d 108 (2d Cir. 2009) (good business justification and private sale considerations under §363)
- In re Lionel, 722 F.2d 1063 (2d Cir. 1983) (requirement to articulate a good business reason for a §363 sale; fiduciary duties to estate)
- In re Boston Generating, LLC, 440 B.R. 302 (S.D.N.Y. 2010) (sale vs. plan choice; liquidity and value preservation concerns)
- In re Iridium Operating LLC, 478 F.3d 452 (2d Cir. 2007) (limits on plan confirmation and use of §363 where plan is unlikely)
- In re Global Crossing, Ltd., 295 B.R. 726 (Bankr.S.D.N.Y. 2003) (context for 363 sale vs. plan in complex financing structures)
- In re Braniff Airways, Inc., 700 F.2d 935 (5th Cir. 1983) (considering transaction as a whole for fair value rather than component-wise)