Stalking Horse Bidder in Section 363 Sales

This guide outlines the role and protections of a stalking horse bidder in a Section 363 sale. A stalking horse bidder is the initial bidder that sets a minimum bid for the debtor's assets, which helps prevent unreasonably low offers. In exchange for this role, the bidder receives specific protections, including a break-up fee and reimbursement of expenses, as detailed in the asset purchase agreement. Key issues addressed include the need for timely payment of bid protections, especially in cases involving secured creditors, and ensuring that the bidder's claim is treated as a superpriority administrative expense. The guide emphasizes the importance of clear bidding procedures that allow the stalking horse bidder to leverage its rights during an auction. It also highlights the necessity for the asset purchase agreement to maintain provisions regarding bid protections even if the stalking horse bidder is not the successful bidder. Experienced legal counsel is recommended to navigate potential pitfalls.