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interest is a lien and the price "is greater than the aggregate value of all liens," (4) the interest is in bona fide dispute, or (5) the interest holder could be compelled to accept money satisfaction of its interest. At such sales, Code § 363(k) permits lienholders to credit bid up to the amount of their allowed claims.
The reference to "aggregate value" of the liens in § 363(f)(3) raises the issue of whether collateral can ever be sold for less than the amount of the debt secured if the secured creditor opposes the sale. Some courts have held that "value" means the face amount of the lien, so the undersecured creditor's consent is always required. Other courts have held that "value" means the value of the lien as determined by the court pursuant to Code § 506, which implies that the secured creditor's consent is not required if the sale will generate the value of the property. The latter analysis makes sense because § 506 governs how liens are valued, and the secured creditors rights should be adequately protected by its right to credit bid under § 363(k), but is vulnerable to an argument that such a sale cannot benefit the estate.
Sales of All Assets and Creeping Plans
Despite some initial holdings that a sale of essentially all assets of the estate should not be permitted under § 363 absent an emergency, most courts today follow the Second Circuit's lead in Lionel and permit such sales, but may impose somewhat higher standards.
If such a sale also includes elements that will control a subsequent plan of reorganization, it could be denied as being a sub rosa or "creeping" plan. But that argument will not generally be heard if the asset sale does not dictate plan terms and the objector cannot particularize a protection that would be provided by the confirmation process that cannot be satisfied in the § 363 sale context.
Breakup Fees
To protect their investment of time and expenses, initial "stalking horse" bidders frequently insist upon a contractual provision, approved by the bankruptcy court, for payment of a "breakup" fee in the event the property is sold to a higher bidder. Such agreements also frequently include "window shop" provisions, which preclude the debtor from actively soliciting competing bids but permit the debtor to respond to inquiries, and "overbid" requirements so that higher bids are sufficiently higher to cover the amount of the breakup fee that would become payable to the initial bidder.
Some courts have approved such breakup fees in bankruptcy cases based on the debtor's business judgment that they are necessary to stimulate the initial bidder and because they are customary in the nonbankruptcy context of corporate takeovers. Other courts have identified various factors that must be considered before approving a breakup fee. Courts have denied approval of breakup fees where there was insufficient evidence it was necessary to induce further bidding, or where there was a concern the fee would chill
