Editor’s note: this post originally appeared in Law360.
Buying distressed assets is big business. Many distressed assets are acquired through the seller’s Chapter 11 bankruptcy case. In those instances, a buyer will enter into a purchase and sale agreement with the seller/debtor and the agreement is generally subject to notice and opportunity for overbids by third parties and ultimate bankruptcy court approval.
The somewhat problematic issue is determining what rights or obligations, if any, do the parties have under the agreement between the date of execution and the date the Court enters an order approving the sale? This is precisely the issue the parties encountered in the chapter 11 bankruptcy case of Hot Dog on a Stick, which is pending before the U.S. Bankruptcy Court for the Central District of California.