Court Ordered Auctions Presented By: Mike Jones CAI, GPPA, BAS President United Country Auction...
-
Upload
rosaline-lucas -
Category
Documents
-
view
220 -
download
1
Transcript of Court Ordered Auctions Presented By: Mike Jones CAI, GPPA, BAS President United Country Auction...
Court Ordered Auctions
Presented By:Mike Jones CAI, GPPA, BAS
PresidentUnited Country Auction Services
Types of Property• Owned Real Estate – REO and
Corporations• Owned Real Estate – Individuals• Commercial• Development Property• Recreational & Specialty• Residential • Farm & Ranch Land
• Personal Property• Industrial & Commercial • Vehicles & Equipment• Government Surplus• Corporate Assets• Trade Fixtures• Banks & Commercial Lenders• Leasing Companies
2
• Trust Real Estate – Trust Companies, Estates
• Foreclosure Auctions – Trustee’s, Lender Initiated
• Bankruptcy Auctions – Federal Sale; Judge approves the sale process.
• The “stay”, reorganize
Purpose of Filing
• Recover money for unsecured creditors; certain exemptions apply
Purpose of the Court
3
Basic Elements of Bankruptcy
• Chapter 7• Liquidation, Straight Bankruptcy, Walk Away• Individuals and Businesses can file• Simplest and Quickest form available• If 13 or 11 not successful, the case converts to a 7.• Liquidations occur more often.• Can be business or individuals.• Valuations and underwriting are critical to the success of a Chapter 7 case.
• Chapter 11• Reorganization, Debtor in Possession• Normally for Businesses, Can be Individuals• Business reorganizes debt while operating and following a repayment plan• Over $1 million; business and individuals; often need to sell assets to
reorganize; many “convert”; some are pre-packaged.
Bankruptcy Chapters
Bankruptcy Chapters• Chapter 9
• Used for Municipalities• Chapter 12
• Reorganization for Family Farmers & Fisherman• Chapter 13
• Reorganization for Individuals• Referred to as Wage Earners Bankruptcy• Repayment plan for those with regular income• Generally under $1 million; individuals; Trustee appointed, rarely an
auction sale results.• Chapter 15
• International Debtors Bankruptcy
Know the Players• Trustee• Attorney for the Trustee• Accountant for the Trustee or Debtor• Debtor• Debtor’s Counsel• Attorney for the Debtor• Attorney for Secured Creditors• Attorney for Unsecured Creditors• Committee of Unsecured Creditors• US Trustee• Attorney for the United States IRS• Attorney for the Landlord
6
• Most Bankruptcy Estates have no value• Trustees can go years without an auction• Make sure they know you - every mailing• You will need a Auctioneer’s Bankruptcy Bond• Set Commission Schedule – but there’s a trick• You will front advertising and expenses for up to 90 days• Everything is approved by the court
Navigating Bankruptcy
How to Evaluate a Case
• This is the most important principle
Equity Recovery
Evaluating the Schedule of Assets and Liabilities
Structuring Your Deal
8
Equity Recovery• Inspection of Assets• Valuation Analysis• Know what will and won’t be sold – exemptions• Know what is missing when doing a site inspection• Recovering value from leased equipment• When calculating equity recovery, take into account:
• Realistic Valuation• Your fees, expenses, marketing, security• Holding costs – lease payments? Where stored?• Attorney’s fees – all involved.• Trustee commission
• Net Proceeds…Is this a meaningful number for the unsecured creditors?
9
Evaluating the Schedules• Can obtain on PACER• Can be misleading – often done quickly to “file”• Understanding:
• Real Property• Personal Property• Secured Liens• Unsecured Liens• Watch out for equity vs. debt
10
Structuring Your Deal• Listing Agreement
• Keep it simple, the judge must approve it• Everybody will read it so make sure it is professional• Don’t misrepresent anything
•Commission Structure• Buyer’s Premium or not…• See what other auctioneers are getting paid in the same
bankruptcy court• Commission Structure
• The case may be asset rich, cash poor• Be ready to “loan” money to the estate to do a deal
11
Structuring Your Deal – Minimize Risk• Hire counsel if you front money on a case• Ask to recover attorney’s fees in your listing agreement• Have some assets selling absolute without further court approval
with repayment of marketing funds• Make sure the sale has been properly noticed• Make sure the adversaries are on board with a sale• Show up in Court and see what is happening• Talk to the other side with your attorney or general counsel – avoid
last minute objections that can stop a sale• Know if there are any legal issues that could get in the way of a sale• Follow the case on PACER after you have been employed• Make sure the proof of claim period has expired or you are
comfortable with the Schedules• Get an accurate payoff on the secured liens• Get any “carve out” agreements in writing before proceeding with
a sale
Structuring Your Deal - Minimize Risk • Read the Local Rules – know what is and not acceptable to the Court;
some Courts dictate the commission structure• Make sure you are qualified to do the transaction• Be sure you are a “disinterested party”
• You state in writing that you do not have a conflict of interest with any other party in the case.
• If you do have a conflict of interest, you cannot be in the case. Example: The debtor is your uncle.
• If you have done business with a creditor but have not worked with them on the case, then state: “Mike Jones has done business with Wachovia Bank but has not had any conversations with them about this case.”
Structuring Your Deal• Commission Structure
• You can get creative in bankruptcy since there is a more sophisticated seller involved
• Since the goal is to recover money for the unsecured creditors, structure a commission that encourages that…
• Flat Commission• Net Commission• Graduated Scale Commission
• You are setting precedent
14
Structuring Your Deal
15
• Process Fundamentals:– Subject to Bankruptcy Court Approval– Stalking Horse Bidders– Bidding Procedures– Courtroom Auctions– Receiverships– Small Business Administration– Government Auctions– Post Auction
Subject to Bankruptcy Court Approval• All auctions have to be approved by the Court unless the Motion to Sell• Potential Strategies:
• Seek Court approval of an Absolute Sale• Seek Court approval to sell above a disclosed price• Have hearing set for quick Court approval• Purposely require the 20-day notice period• Conduct the auction to get a stalking horse bidder and use the “2nd
auction” to finalize the transaction
Stalking Horse Bidder• This is the bidder that has signed a contract with the Debtor or
Trustee but the contract is still subject to Bankruptcy Court approval aka higher and better bids.
• Stalking Horse Bidders have an advantage over all other bidders:• They set the terms• They are on the inside during the case• They can receive a break-up fee for expenses only• The agree to allow you to “shop” their bid (they don’t like it but they don’t
have a choice)• Some buyers don’t know they are a Stalking Horse bidder and they get
upset.
17
Bidding Procedures• This can make or break your sale – be an active participant in this
process. You must follow them since they set the rules for your auction.
• Comparable to your terms of sale but there is less auctioneer discretion, i.e., if the Bidding Procedures state each bidder must – no exceptions. If you make an exception for a buyer you know, another bidder could object to your sale and cause a problem.
• All interested buyers must receive a copy of the bidding procedures in your Property Information Package.
18
Courtroom Auctions• Some Courts like them…others do not• Some Judges want to do the auction themselves…others do not• Some want you to conduct the auction in the Courtroom…others want you
to conduct the auction in a conference room or hallway in the courthouse and report back with the results
• Be ready to do all of it• Have an administrative person with you and your attorney• You need your attorney in case there is a dispute over procedure• Be ready for procedural objections, multi-par arguments (what is the raise
amount, how long between raises, etc.)
• Receivers are appointed by the court to manage assets• Often found in SEC, IRS Criminal/Civil Cases, Divorces, Probates, Estate
Settlement, Guardianships, etc.• Know who they are and how they get paid• Must file a motion with court to sell & Employ• Normally No Required Bond• Receivers are normally Attorneys but not always• Auctioneer remits Net Proceeds• Complete and Accurate Reporting
Receiverships
Small Business Administration• SBA Guarantees Loans for Small Businesses
– Normally 90/10– Diminishes risk to bank
• Bank Services the Loan– If Assets are liquidated, Bank manages
• Bank will need help recapturing assets• Posts Legal Notice of Sale• Bank Contracts with Auctioneer• Auctioneer Delivers Net Proceeds to Bank• May get Appraisal Work here
• Most Federal Property Auctions are online– www.GSAauctions.gov
• States Typically contract with one firm for many years• Counties & Cities are largely online only• Purchasing Director rules the world, wait for change• Change is hard• Extra work is not acceptable• The “Save Money” Or “Higher Prices” Pitch likely will fall on deaf ears
Government Auctions
• Deliver Gross Proceeds to Trustee• Invoice for Expenses and Commission
• Detailed Expense Reporting• Detailed Settlement Statement• Report of all Inquiries, Registered Buyers• Copy of Terms and Conditions, any Contracts• Patiently Wait for Payment
Post Auction
Barriers To Doing The Deal• Understand what “Subject to US Bankruptcy Court approval” really means• Understand what it means to be a “disinterested party”• Understand the significance of the Motion to Employ and Motion to Sell
Free and Clear• Understand the Bidding Procedures
24
To Learn More• American Bankruptcy Institute• American Bankruptcy Institute Journal• Five Star Conference• Turnaround Management Association• Wall Street Journal• Investor’s Business Daily• Local Business Journal• Internet • Go to the Court Room
Q&A
Court Ordered Auctions
Presented By:Mike Jones CAI, GPPA, BAS
PresidentUnited Country Auction Services