From Allens to Rogers Bancshares, Bankrupt Firms Still Entice Buyers

by Mark Friedman  on Monday, Jan. 20, 2014 12:00 am  

An auction is scheduled Feb. 3 to sell the assets of Allens Inc., the Siloam Springs cannery, out of its Chapter 11 bankruptcy.

U.S. Bankruptcy Judge Ben Barry is expected to approve the sale on Feb. 10. It will be the latest example of a trend of companies buying assets out of bankruptcy.

On Nov. 25, Simmons First National Corp. of Pine Bluff closed on its $53.6 million acquisition of Metropolitan National Bank of Little Rock. Simmons bought the bank from Metropolitan’s parent company, Rogers Bancshares Inc., while it was in Chapter 11 bankruptcy.

Businesses have been buying businesses out of bankruptcy for years and the trend should continue, said Michael Stewart, a partner in Faegre Baker Daniels LLP of Minneapolis, a 750-attorney law firm that focuses on financial restructuring services.

“More and more, we’re seeing bankruptcy used as a forum for disposition of assets,” he said.

The purchase of a bankrupt business, though, can be either a bargain or a bother for the new owner.

“Sometimes in bankruptcy proceedings, as a buyer you can get a bargain,” Stewart said. “By definition, the company is financially challenged, and because of that, it isn’t in a position of strength when dealing with potential buyers.”

Stalking Horse

Both Allens and Rogers Bancshares used a “stalking horse bidder” to set the opening bid for their assets in an auction.

Seneca Foods Corp. of Marion, N.Y., will be the stalking horse bidder in Allens’ case and is offering $148 million to buy the assets.

Other firms can submit bids to buy Allens, but Seneca will have the opportunity to match the price.

Using a “stalking horse bidder” is common in buying assets out of bankruptcy, Stewart said. “The benefit is … usually it provides some level of assurance for other bidders that somebody has come in and done due diligence,” he said.

 

 

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