Investment in Distressed Assets in New York: Purchasing an Asset in Bankruptcy or via a UCC Foreclosure

Opportunities are increasingly emerging in New York for the purchase of distressed assets. Opportunities abound in commercial real estate, residential real estate, retail, manufacturing, franchising, distribution and food & beverage. Many of these distressed assets shall hit bankruptcy courts or shall be sold under the UCC. Opportunities are, immediately, available for investors with access to immediate cash, the ability to conduct nuanced due diligence and an ability to either turnaround distressed businesses or weather the present real estate storm.

Distressed Asset Bankruptcy

We have seen great opportunities that have emerged over the past month and we suspect to see many more opportunities in the coming months. Many companies on the brink are, merely, being supported by government money. We expect to see an increase in bankruptcy filing in the near future. Additionally, opportunities, already, are present in luxury real estate and commercial real estate in NY. Some land owners are on the brink and the banks have tightened up.

Distressed Assets Opportunities via Bankruptcy

Bankruptcy, in many cases, is an excellent avenue for the purchase of a distressed asset. Sales of business assets can occur via a Chapter 11 bankruptcy or Chapter 7 bankruptcy.

In a Chapter 7 bankruptcy, the distressed asset, typically, is under the control of the creditors in the bankruptcy’s court reorganization or liquidation process. Thus, a purchase of the asset can be via a sales agreement from the creditors. However, the creditors, typically, are under the supervision of the bankruptcy court, thus, the court may need to approve the deal. In many cases, the creditors are willing to take a steep haircut or substitute credit for equity for offloading the distressed asset. Many of these creditors are, simply, not in the business of managing assets and would rather offload the asset and cut its losses.

Distressed asset sales via Chapter 7 liquidations are typically managed by Chapter 7 trustees or secured creditors.  In many cases the Chapter 7 trustee or the secured creditors are, also, willing to sell these distressed assets to a willing and able buyer. Again, many of these creditor are not interested in owning assets. This is, particularly, true when the assets are difficult to place a value on or the asset is a unique asset or business.

Distressed Asset Opportunities via Sales under the UCC

In a UCC Sale, the secured creditor’s exercise its right to foreclose its collateral via either a public or private sale under the Uniform Commercial Code and applicable local law. In most cases, these sales are a means to liquidate a closing business, however, this process can, also, be used to liquidate certain assets, while the business is restructured.  This purchased asset shall be free and clear of any liens or potential monetary claims.

While opportunities are increasing, sharks are swarming for the kill. It is essential to have a proactive and street-smart professional on your side with experience in the purchase of distressed assets. When times are tough, opportunities increase, however, the sharks are often hungry and out for a quick meal.

If you are interested in a consultation with an attorney or a business professional please: Schedule a Call.

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