In re ICL Holding Co., Inc.: Third Circuit Upholds Escrow for Professionals and Settlement Sum Directly to General Unsecureds by 363 Purchaser over Objection of Administrative Claimant

November 12, 2015Articles American Bankruptcy Institute: Asset Sales Committee News Letter

In September 2015, the U.S. Court of Appeals for the Third Circuit issued an opinion in In re ICL Holding Co. Inc. that further reinforces the ability to use § 363 sales and settlements to resolve chapter 11 cases.

Factual Background
In 2012, Texas-based LifeCare Holdings, Inc. and its affiliated debtors (collectively, “the debtor”) were struggling financially, carrying a $484 million debt load, of which approximately $355 million was secured.[1] A group of secured lenders offered to purchase all of the assets of the debtor (including cash) for a $320 million credit bid (out of the $355 million of debt that they were then owed), plus $1.8 million in cash to pay the legal and accounting fees of the debtor and the unsecured creditors’ committee, as well as the debtor’s wind-down costs.[2] The cash was to be put into an escrow account, and any unused amounts were required to be returned to the secured lenders. In December 2012, the debtor entered into an asset-purchase agreement (APA) with its secured lenders; the next day, the debtor filed for bankruptcy.[3]

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