Chapter 11 Business Bankruptcy Sales and Orderly Wind Downs
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When Chapter 11 Is Used for Business Sales or Exit Strategies
Chapter 11 is most often used as a reorganization tool, but there are other situations where an entity might need the relief only Chapter 11 can provide. These involve the sale of an operating business or significant assets, or when a company seeks to go out of business in an orderly manner.
Advantages of Selling a Business or Assets Through Chapter 11
Selling a business or assets inside Chapter 11 can be beneficial for two reasons. First, the protection afforded by Chapter 11 gives a financially distressed company time to market and find the right buyer, and thereby maximize value. And second, Chapter 11 allows assets to be sold "free and clear" of liens and claims. This ability to have a clean sale and cut off potential successor liability can add tremendous value to the sale process.
Using Chapter 11 to Wind Down a Business in an Orderly Way
It's a fact that businesses fail, and going out of business can be difficult and complicated. Winding down in an organized fashion typically includes fulfilling remaining orders or contracts, collecting outstanding receivables, selling assets, and paying claims. This can be impossible in the face of lawsuits and other pressure from creditors. Chapter 11 protection provides the time and structure to wind down a business in a way that maximizes value, ties up loose ends, and delivers finality.
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Real-World Example: Successful Chapter 11 Sale Process in a Nashville Healthcare Bankruptcy Case
A recent example of how Chapter 11 can be used to maximize asset value through a court-supervised sale is the Nashville Senior Care cases, where EmergeLaw served as co-counsel to the Debtors. Faced with industry-wide financial strain, the senior living provider filed for Chapter 11 protection to facilitate an organized asset sale. The process began with a stalking horse bid of $41 million and, through a competitive auction, resulted in a final sale price of $55 million—demonstrating the power of Chapter 11 to generate value and attract higher bids. The court-approved transaction prevented disruption for nursing home residents and patients, preserved operations, protected jobs, and maximized creditor recoveries. Read more about the Nashville Senior Care Chapter 11 cases here.