363 Sale
Definition
A 363 sale is a sale of a debtor's assets in bankruptcy under section 363 of the Bankruptcy Code, outside of (or alongside) a plan of reorganization. Its defining feature: the buyer acquires the assets "free and clear" of liens, claims, and encumbrances, with creditor claims attaching to the sale proceeds instead.
Process: the debtor typically signs an initial agreement with a stalking horse bidder — who sets the price floor and receives bid protections (a breakup fee, commonly around 2–3% of the price, plus expense reimbursement) — then the court runs an auction with overbid procedures, and the highest or best bid is approved at a sale hearing.
363 sales are faster and more certain than full plan processes, which makes them attractive for melting-ice-cube businesses. Secured creditors can usually credit bid their claims (section 363(k)), using debt as currency to buy the collateral.
Why interviewers ask
Restructuring interviews frequently ask how a company can be sold in bankruptcy, what a stalking horse is, and what credit bidding means. "Free and clear" is the load-bearing phrase interviewers expect — it explains why buyers like 363 processes.
Related terms
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