By: Scott B. Riddle, Esq. has an article entitled Buying Distressed Assets Under §363 of the U.S. Bankruptcy Code. The authors are William Gray Jr. and Alison Bauer from the New York office of Torys LLP.

From the introductory paragraphs —

There are three ways to buy assets from a Chapter 11 estate: through a sale under §363 of the Bankruptcy Code (§363 sale), under a Chapter 11 plan of reorganization or from a post-confirmation liquidating trust.

This article focuses on sales under §363, which allows a buyer to obtain court approval of a purchase cheaper and faster (and with the advantages and protections of a court order largely intact) than through a reorganization plan or from a post-confirmation trustee.

A §363 sale transfers the acquired assets free and clear of any liens, claims and encumbrances. The power of the §363 order to cleanse troubled assets propels many acquirers to condition their purchases on the Chapter 11 filing of troubled sellers to obtain its benefits. The flip side of these advantages is that the bankruptcy sale process is public, and the sale is almost always subject to higher and better offers at an auction. ….

While the article focuses on the procedures enacted in the Southern District of New York, it is a good summary of §363 sales.