From Allens to Rogers Bancshares, Bankrupt Firms Still Entice Buyers

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

And at least the stalking horse bidder thinks that the business is worth the opening bid. “The belief among investment bankers and professionals is that if you have a stalking horse, that will enhance the likelihood of a robust auction,” Stewart said.

In addition, bidders know the transaction is going to be quick and possibly close in around 60 days.

There’s also protection for the stalking horse bidder. If the bidder loses the auction, it will get a breakup fee. In Seneca’s case, it will receive $4.5 million.

The stalking horse bidder does have an advantage, said David Garner, an executive vice president at Simmons. “They have a lot of time up front, before everybody else, to do their due diligence,” Garner said.

Ford Financial Fund II of Dallas was the stalking horse bidder to buy Metropolitan National Bank from Rogers Bancshares. Ford Financial said it would pay $16 million for the bank.

During the auction for Metropolitan, the bidding with Arvest Bank of Fayetteville went through 19 rounds.

Garner said Simmons had a price it was willing to pay, but declined to say what it was. “You walk in with what your best offer is and if the price goes above that, then you walk away,” he said. “Fortunately, the bidding never reached a level that was above what we believed our best offer was for it. We were able to come out the victor in the auction process.”

Ford Financial also didn’t walk away empty-handed. Its bill for acting as the stalking horse bidder totaled $2 million.

Fresh Start

Buying assets out of bankruptcy court allows the buyer a fresh start because the debts are left behind in bankruptcy court. “It really gives new meaning to the words free and clear,” said Jacen Dinoff, principal and co-founder of the KCP Advisory Group of New York, which offers corporate transaction and reorganization services.

Buying a business out of bankruptcy gives the buyer “the opportunity to sleep at night knowing that what you see is what you get with that acquisition,” Dinoff said.

Still, he said, the new owner doesn’t want to make the same mistakes as the previous owner and land the company back in bankruptcy. He suggested potential buyers have their own corporate attorneys and financial advisers to assist them in structuring the price and the transaction.



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