Opinion ID: 3024056
Heading Depth: 2
Heading Rank: 2

Heading: The Acquisition

Text: SubMicron began acquisition discussions with Sunrise in July of 1999. By all accounts, it was generally understood that if SubMicron failed to reach a deal with Sunrise, it would be forced to liquidate, leaving secured creditors—with the exception of Greyrock—with pennies on the dollar and unsecured creditors and shareholders with nothing. 8 KB/Equinox, not SubMicron’s management, conducted negotiations with Sunrise, developing and agreeing on the terms and financial structure of an acquisition to occur in the context of a prepackaged bankruptcy. On August 31, 1999, SubMicron entered into an asset purchase agreement with Akrion, the entity created by Sunrise to function as the acquisition vehicle. The following day, SubMicron filed a Chapter 11 bankruptcy petition and an associated motion seeking approval of the sale of its assets to Sunrise outside the ordinary course of business pursuant to § 363(b) of the Bankruptcy Code. The asset purchase agreement reiterated, inter alia, that KB/Equinox and Celerity would contribute their secured claims (i.e., the 1997 Notes, the 1998 Notes and the 1999 Fundings) in order for Akrion to credit bid these claims under § 363 of the Bankruptcy Code—but only contingent on the closing of the sale. The agreement also required SubMicron, at the closing of the sale, to pay $5,500,000 immediately to the holders of the 1999 Fundings. In return, KB/Equinox and Celerity would receive a 31.475% interest in Akrion (KB/Equinox received a 30% interest and Celerity received a 1.475% interest). The Court and Official Committee of Unsecured Creditors (the “Creditors’ Commitee”) were apprised of the terms of this agreement prior to the sale. At the sale hearing Akrion submitted a bid of 9 $55,507,587 for SubMicron. The cash component of the bid totaled $10,202,000 and included $5,500,000 in cash from Akrion, $3,382,000 to pay pre- and post-petition Greyrock secured debt, and $850,000 to cover administrative claims.5 The credit portion of the bid consisted of the $38,721,637 outstanding for the 1997 Notes, the 1998 Notes, and the 1999 Fundings (all of which KB/Equinox and Celerity had contributed to Akrion), plus $1,324,138 in individual secured claims, for a total of $40,045,775. Finally, the bid included SubMicron’s liabilities that would be assumed by Akrion—$681,346 in lease obligations and $4,578,466 in other assumed liabilities for a total of $5,259,812. No other bid for SubMicron’s assets was made, SubMicron’s Board and the Court both approved Akrion’s bid over the objection of the Creditors’ Committee, and on October 15, 1999, the asset sale closed. On April 18, 2000, the Creditors’ Committee brought against the Lenders, among others, an adversary proceeding in which it made the claims before us on appeal. (Cohen was subsequently substituted for the Creditors’ Committee.) After a bench trial before Judge Sue Robinson in late July/early August 2001, she ruled against Cohen, setting out her reasoning in a comprehensive opinion. Cohen appeals. 5 These enumerated components of the cash portion of the bid total $9,732,000, not $10,202,000. The District Court’s opinion leaves unclear what accounted for the missing $470,000. 10