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84 Am. Bankr. L.J. 297 (2010)
Majority Rules: Non-Cash Bids and the Reorganization Sale

handle is hein.journals/ambank84 and id is 303 raw text is: Majority Rules: Non-Cash Bids and the Reorganization Sale by Randall Klein* and Danielle Juhle** INTRODUCTION An over-leveraged borrower struggles with liquidity. A restructuring or liquidation of that borrower's business is imminent. Secured lenders hold too much debt with too little collateral. The secured debt is held by multiple lenders, making remedies complicated. Individual lender interests differ and substantial disagreement exists regarding the appropriate strategy and reme- dies to employ with respect to the borrower. The question: Can the major- ity lenders bind the minority lenders to their chosen restructuring strategy, including a sale as a going concern to an entity created by a majority of the lenders for non-cash consideration (referred to herein as a reorganization sale)? Most people would have no trouble identifying the foregoing fact pattern as the financial situation confronting a large number of borrowers and secured lenders in today's market. The plight faced by secured creditors in this fact pattern, however, was also typical of the struggles facing bondholders of dis- tressed railroads in the late 1800s and early 1900s.' Thus, the case law de- veloped during that time period is instructive. In the late 1 800s and early 1 900s, courts and scholars frequently debated the limitations of the right of the majority to bind the minority under the same credit facility. Much of the debate focused on whether the majority could force the minority lenders to accept distributions from the majority-controlled sale (then called a reorgani- *Principal and Chair of the Creditors' Rights and Bankruptcy Group, Goldberg Kohn Ltd. Fellow, American College of Bankruptcy. **Asaociate, Goldberg Kohn Ltd. Ms. Juhle and Mr. Klein represented Newco in connection with the § 363 acquiaition of Ames Holding Corp. discussed below. 'As a result, a spate of recent articles likens the results of the modern day reorganization sale pursuant to § 363 of the Bankruptcy Code to the supposedly discredited equity receiverships of the late 1800s and early 1900s. Mark J. Roe & David A. Skeel Jr., Assessing the Chrysler Bankruptcy, 108 MICH. L. REV. 727 (2009); Ralph Brubaker & Charles Jordan Tabb, Bankruptcy Reorganizations and the Troubling Legacy of Chrysler and GM, available at http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context =ralph-brubaker (2010) (fearing more § 363 sales like GM and Chrysler portend that the equitable receivership will have been raised from the dead); Daniel Buasel & Kenneth Klee, Recalibrating Consent in Bankruptcy, 83 Am BANKR. L. J. 663, 73 1-32 (2009); but see Stephen J. Lubben, No Big Deal: The GM and Chrysler Cases in Context, 83 Am. BANKR. U.. 531 (2009). 297

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