CTP Sale Processes & M&A in Distressed Situations 2

Question 1

Under UCC Article 9, an out-of-court 'strict foreclosure' allows a secured lender to:

Accepted Answer

Take ownership of collateral in full satisfaction of the debt, bypassing a traditional auction

Answer

UCC Article 9 strict foreclosure allows a secured creditor to accept collateral in full satisfaction of the debt without conducting an auction, subject to obtaining required consents from the debtor and other lienholders.

Question 2

In a distressed M&A process, what is the primary role of an investment banker acting as sale advisor to the debtor?

Accepted Answer

To market the business to potential buyers and run a structured auction to maximize sale value

Answer

An investment banker in a distressed sale markets the business confidentially, qualifies buyers, structures a competitive process, and negotiates to maximize value while managing the tight timing constraints unique to distressed situations.

Question 3

Which of the following best describes a 'pre-packaged' bankruptcy in the context of distressed restructurings?

Accepted Answer

A restructuring where the plan of reorganization is negotiated and voted on by creditors before the bankruptcy filing

Answer

A pre-packaged bankruptcy involves negotiating and obtaining creditor votes on a reorganization plan before filing, dramatically shortening the time spent in court while still providing formal bankruptcy protections.

Question 4

What is the 'sub rosa plan' doctrine as applied to Section 363 sales?

Accepted Answer

A doctrine prohibiting 363 sales that effectively dictate reorganization plan terms without plan confirmation protections

Answer

The sub rosa plan doctrine, rooted in the Lionel Corp. case, prohibits using a 363 sale to circumvent creditor voting rights and the protections afforded by the formal plan confirmation process.

Question 5

Which document governs the terms, timeline, and procedures for a Section 363 bankruptcy auction sale?

Accepted Answer

The bidding procedures order approved by the bankruptcy court

Answer

The bidding procedures order, entered by the bankruptcy court, governs all aspects of the auction including deadlines, minimum bid increments, break-up fees, and qualification requirements for competing bidders.

CTP - Certified Turnaround Professional Practice Test

CTP - Certified Turnaround Professional Practice Test

CTP Sale Processes & M&A in Distressed Situations 2