Lead Trump or Risk Losing? A Comparison of Bidding Procedures for the Acquisition of a Business in Canadian and U.S. Restructuring Proceedings

Abstract

The goal for any debtor selling business assets in restructuring proceedings is to maximize realization. The process by which the assets are sold certainly contributes to the debtor's success in achieving this goal. In Canada, sales processes have generally been based on a close-bid system in which a winning bid is chosen privately and then recommended for court approval. In the US, a two-step process is used in which a “stalking horse” bid is accepted on the condition that it will be later subject to an open judicial auction. Once the auction is complete, the debtor will seek court approval of a sale to the winning bidder. In this paper, we examine which process best achieves the debtor's goal of maximum realization for its assets.