Why is it called a stalking horse bid?

A stalking-horse bid is an initial bid on the assets of a bankrupt company. … The stalking horse sets the low-end bidding bar so that other bidders can not underbid the purchase price. The term “stalking horse” originates from a hunter trying to conceal himself behind either a real or fake horse.

Where does the phrase stalking horse come from?

The term stalking horse originally derived from the practice of hunting, particularly of wildfowl. Hunters noticed that many birds would flee immediately on the approach of humans, but would tolerate the close presence of animals such as horses and cattle.

Is a stalking horse bid binding?

To compensate the stalking horse for its time and effort, certain incentives are typically negotiated, subject to bankruptcy court approval. … That way, the debtor’s agreement to bidding incentives is binding on the debtor at the time it signs the purchase agreement, not later upon bankruptcy approval of such incentives.

How do you become a stalking horse bidder?

To secure a stalking horse offer, the debtor can offer bidding protections such as breakup fees to its best bidder before the auction. These incentives enhance the value of the offering for the bidder, which might lead to a better price offer before the auction begins.

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What is a stalking horse takeover?

“STALKING HORSE BIDS” The CCAA regime allows the purchase of assets by what is known as a “stalking horse bid.” This approach is well-known in the United States, but relatively new in Canada. … The practice of DIP financing began originally through the exercise of the broad discretion given to the courts under the CCAA.

What is a stalking?

Stalking is behavior wherein an individual willfully and repeatedly engages in a knowing course of harassing conduct directed at another person, which reasonably and seriously alarms, torments, or terrorizes that person. Stalking involves one person’s obsessive behavior toward another person.

What is the purpose of a stalking horse?

The stalking-horse bid method allows a distressed company to avoid receiving low bids as it sells its final assets. Once the stalking-horse bidder has made its offer, other potential buyers may submit competing bids for the company’s assets.

What is a stalking horse sale?

In the context of section 363 sales in bankruptcy, a stalking horse is a bidder used to set the purchase price floor so other bidders can know the minimum to bid for the target company. … The opportunity to negotiate the basic contract terms and structure of the transaction and the bidding procedures.

How does a 363 sale work?

A 363 Sale refers to the sale of an organization’s assets. … The bankruptcy court grants the debtor-in-possession or trustee the power to sell the organization’s assets even when there is an objection from junior creditors. Also referred to as subordinated debt, after a court hearing of their petition.

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What is a dark horse bid?

Process. An investor can make an offer to purchase an asset or company through the bankruptcy court by making a stalking horse bid. … In the event that bid is not the winning bid, then the investor may request a breakup fee.

What is a topping fee?

In a 363 auction a type of break-up fee that the debtor agrees to pay to an initial proposed purchaser (the stalking horse) if the proposed purchaser is not the prevailing bidder in the auction.

What is a credit bid?

Credit bidding is a mechanism, enshrined in the US bankruptcy legislation, whereby a secured creditor can ‘bid’ the amount of its secured debt, as consideration for the purchase of the assets over which it holds security.

What is a 363 sale definition?

The term “363 sale” refers to a sale of a debtor’s assets authorized under section 363 of the Bankruptcy Code. … Generally, when bankruptcy practitioners refer to a “363 sale” they are referring to a sale of substantially all of the assets of a chapter 11 debtor.

What is a dark horse?

A dark horse is a previously less known person or thing that emerges to prominence in a situation, especially in a competition involving multiple rivals, or a contestant that on paper should be unlikely to succeed but yet still might.

Trakehner horse