Defending the Current State of Section 363 Sales by Jared

Notwithstanding the priority-based controversy following the Chrysler and GM § 363(b) sales, value is the central dispute dominating the asset sale debate. Given the mounting data purporting to show that sales harm junior creditors by producing low value, I confront two issues in this article. First, I address the depth and breadth of the low value phenomenon for junior creditors, concluding that(a) although sales appear to cut deeply into creditor recoveries, causation has yet to be shown; and (b) sales have not, contrary to the predictions of some scholars, overtaken reorganization. Second, using qualitative and quantitative analysis, I challenge four explanations of the low value phenomenon: weak capital markets, secured creditor control, manager and financial advisor conflicts of interest, and judicial corruption and forum shopping. I conclude that none of these explanations is satisfactory in light of junior creditor powers and the protective procedures that have evolved under § 363. This conclusion stands even in Delaware, which employs the business justification standard and is the forum of choice for most large § 363 cases.