Class 23 Bankruptcy, Spring, 2009 Chrysler Sale Order Randal C. Picker Leffmann Professor of...
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Transcript of Class 23 Bankruptcy, Spring, 2009 Chrysler Sale Order Randal C. Picker Leffmann Professor of...
Class 23Bankruptcy, Spring, 2009
Chrysler Sale OrderRandal C. PickerLeffmann Professor of Commercial Law
The Law School
The University of Chicago
773.702.0864/[email protected] © 2005-09 Randal C. Picker. All Rights Reserved.
April 21, 2023 Copyright © 2005-09 Randal C. Picker 2
363
Use, sale, or lease of property (b)(1) The trustee, after notice and a
hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate … .
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363 (cont.)
Use, sale, or lease of property (f) The trustee may sell property under
subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if -
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
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363 (cont.)
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or (5) such entity could be compelled, in a legal
or equitable proceeding, to accept a money satisfaction of such interest.
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Assumption
Meaning Estate has choice about whether to perform
debtor’s prepetition contract Assumption means estate accepts
obligation to perform under contract
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Mechanics
To assume a contract (365(b)) Trustee must cure—fix—most prepetition
defaults; Compensate for actual pecuniary losses
from the default; and Provide adequate assurance of future
performance
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365: Rejection
Executory contracts and unexpired leases (cont.) (g) Except as provided in subsections (h)(2) and (i)
(2) of this section, the rejection of an executory contract or unexpired lease of the debtor constitutes a breach of such contract or lease -
(1) if such contract or lease has not been assumed under this section or under a plan confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the date of the filing of the petition; or
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Chrysler Sale Order
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19(e): UAW Contract Assumption
“(e) UAW and GMAC Agreements. Contingent upon the approval of the sale of the Purchased Assets to the Purchaser and concurrently with the consummation of the sale of the Purchased Assets (without prejudice to the conditions thereto set forth in the Purchase Agreement), (i) each of the UAW CBA Assignment and the GMAC MAFA Documents (as such term is defined in the Bidding Procedures attached hereto as Exhibit A) shall be deemed to be Confirmed Agreements as to which no Assignment Notice or Confirmation Notice shall be sent,”
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19(e): UAW Contract Assumption
“(ii) the Debtors shall assign to Purchaser, and Purchaser shall be deemed to have assumed, each such agreement as of the Closing Date, and each non-Debtor party to each such agreement shall be deemed to have consented to such assumption and assignment and (iii) the Court order approving such sale shall reflect such assumption and assignment.”
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19(f): Dealers
“(f) Direct Dealer Agreements. Certain executory dealer agreements will be identified as Designated Agreements to be assumed and assigned. Although most U.S. dealers have entered into standard uniform dealership agreements in the form of the Chrysler Corporation Sales and Service Agreement (the “Sales and Service Agreement"), some dealers are party to older agreements in the form of the Chrysler Direct Dealer Agreement (each, a “Direct Dealer Agreement”),”
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19(f): Dealers
“If a Direct Dealer Agreement is identified as a Designated Agreement pursuant to the procedures above, then such Direct Dealer Agreement will only be assumed and assigned to the Purchaser if the counterparty to the Direct Dealer Agreement first agrees to modify such Direct Dealer Agreement and restate it in the form of the Sales and Service Agreement (each such modified Direct Dealer Agreement and Sales and Service Agreement, a “Dealer Agreement”).”
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19(f): Dealers
“If the counterparty and the Debtors do not so modify and restate such Direct Dealer Agreement in the form of the Sales and Service Agreement, then notwithstanding any other provisions of these Contract Procedures, such Direct Dealer Agreement will not be assumed and assigned pursuant to these Contract Procedures.”
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Screen Capture Slide
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Understanding the Sale Order: Starting Points
Hypo 1
Cash $120 U1: $100U2: $100U3: $100
Debtor
How should we divide the assets?
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USO: Sale Instead
Hypo 2
Asset $120 U1: $100U2: $100U3: $100
Debtor
Does anything change if we have an asset instead of cash and the asset is sold to a third party first?
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USO: Sale w/Assumption
Hypo 3
Asset $120 U1: $100U2: $100U3: $100
Debtor
Suppose that we require the buyer to assume U3’s debt: what happens?
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USO: Executory Contract
Hypo 4
Cash $120 U1: $100U2: $100U3: $100
Debtor
D has Exec K: Will need to spend $40 to create $70: what happens?
Exec K
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USO: Executory Contract
Hypo 5
Cash $120 U1: $100U2: $100U3: $100
Debtor
D has Exec K: Will need to spend $70 to create $40: what happens?
Exec K
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USO: Absolute Priority?
Hypo 6
Asset $120 Senior: $200U1: $100U2: $100U3: $100
Debtor
Senior wants to claim asset and assume debt of U3: what happens?
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USO: Voluntary Assumption By Buyer
Hypo 5
Asset $120 U1: $100U2: $100U3: $100
Debtor
Buyer pays $120 and voluntarily assumes U3 debt: what happens?
Chrysler Itself
Which of these match the Chrysler Sale Order?
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Want to Read More?
Bankruptcy Litigation Blog http://www.bankruptcylitigationblog.com/arc
hives/bankruptcy-in-the-news-chrysler-files-bankruptcy-part-i-assessing-the-financial-carnage.html
Credit Slips http://www.creditslips.org/creditslips/2009/0
5/chrysler-363-sales-again.html
April 21, 2023 Copyright © 2005-09 Randal C. Picker 23
More?
Wall Street Journal http://online.wsj.com/article/SB1242173568
36613091.html
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