Saturday’s WSJ notes that the “363 sale” used in Chrysler (referring to Section 363 of the Bankruptcy Code) is
typically used to shed assets * * * that need[] to be sold quickly to maximize its value, and can be done without creditor approval. But critics said Chrysler used the procedure to restructure the entire company.
Now a hockey team is trying it. Where does it end?
Bankruptcy and financial professionals said such scenarios, if successful, could make investors demand higher interest rates on debt amid uncertainty over how they might fare should the firm encounter financial difficulties.
"The concern is that you have thousands of lenders, hedge funds, insurance companies who model their investments on rules and laws," said Stephen Lerner, a lawyer for a committee of Chrysler dealers. "How do these folks make investment decisions when they're faced with bankruptcy courts that appear to disregard the rules?"
* * * Lawyers who represent banks, hedge funds and other creditors fear the Chrysler precedent could be used to allow companies to get around established rules for reorganizations, and not just in extraordinary circumstances.
Update: Mark Roe has an article in Forbes on the bankruptcy law issues in Chrysler.
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