The benefits and risks of a 363 sale
| 363 Sale Feature | Benefit for Buyer | Risk |
|---|---|---|
| Free and clear | No inherited liens, lawsuits, or environmental claims | Must still do diligence on asset quality |
| Court approval | Provides legal finality — sale is very hard to challenge | Auction process may push price up |
| Speed | Typically 45–90 days from filing to close | Fast timeline limits diligence |
| Stalking horse | Initial bidder sets the floor price and terms | Must accept being outbid at auction |
The stalking horse and its breakup fee
The stalking horse bidder negotiates a breakup fee (typically 2–3% of deal value) for the risk of being outbid. Being the stalking horse gives you information advantage and sets the terms, even if you lose the auction.
Watch a case for 363 sale motions
Follow a major bankruptcy case and watch for 363 sale motions. The stalking horse bid reveals the floor value, and subsequent bids reveal how much competitive interest exists.
Why the stalking horse bid is a floor
A company in Chapter 11 proposes a 363 sale of its best division for $500M to a stalking horse. Two other bidders emerge. What happens?
Why 363 sales are the preferred exit
The buyer's main attraction: no inherited liabilities
A bankrupt company initiates a Section 363 asset sale. Strategic buyer wins with a $500M bid. What's the main attraction of 363 sales for buyers?
Check your understanding
Sit with the ideas.
A bankrupt airline is selling its gates, routes, and aircraft via Section 363. A strategic competitor submits a stalking horse bid of $1.8B with a 2% breakup fee. At auction, a second bidder wins at $2.1B. The airline's secured debt is $1.5B and unsecured bonds total $900M. What are the key outcomes?
Why: