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Stalking horse offer

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A stalking horse offer (also known as a stalking horse agreement) refers to an attempt by a debtor to test the market in advance of an auction.[1] The intent is to maximize the value of its assets as part of (or before) a bankruptcy court-approved auction process.[2]

Procedure

While entering a stalking horse offer, the debtor can offer bidding protections such as breakup fees to its best bidder before the auction. These incentives enhance the value of the offering for the bidder which might lead to a better price offer before the auction begins. This higher offer is now the starting offer for the auction and may result in benefiting the debtor and its estate.

Examples

On 4 August 2008, Steve and Barry's LLC, a retailer of casual apparel, filed a stalking horse agreement with the U.S. Bankruptcy Court for the Southern District of New York. Their partner in this asset purchase agreement was BH S&B Holding LLC, a subsidiary of Bay Harbor Management.[3]

On 27 July 2009, The Wall Street Journal reported that Telefon AB L.M. Ericsson had won a stalking horse bid to acquire Nortel Networks Corp's CDMA division, for $1.13 billion. [4]

On 21 February 2011, Reuters reported Blockbuster's intention to pursue a $290 million stalking horse offer with Cobalt Video Holdco. [5]

On 4 April 2011, TechCrunch reported Google's intention to pursie a $900 million stalking horse bid for Nortel's patents. [6]

References

  1. ^ Financial Times Lexicon from the Financial Times
  2. ^ The ‘Stalking Horse’ in a US Chapter 11 363 Sale From Financier Worldwide’s May 2006 Edition
  3. ^ "Steve & Barry’s Files “Stalking Horse” Agreement", from Businesswire.com, 4 August 2008.
  4. ^ "Ericsson Powers Up U.S. Presence With Nortel Deal", from The Wall Street Journal, 27 July 2009.
  5. ^ "Blockbuster gets $290 million stalking horse bid", from Reuters, 21 February 2011.
  6. ^ "Google Makes $900 Million Stalking-Horse Bid For Nortel Patents As It Looks To Fend Off Trolls", from "TechCrunch", 4 April 2011.
  • Owsley, Henry (2005). Distressed Investment Banking. City: Beard Books. ISBN 1587982676.
  • Hillman, William (2004). Bankruptcy Deskbook. City: Practising Law Institute (PLI). ISBN 0872241394.
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