AFA Investment Inc., and its affiliates, including AFA Foods, American Foodservice Corporation, United Food Group, LLC, and American Fresh Foods (together “AFA”) have requested that the Bankruptcy Court overseeing their Chapter 11 cases approve procedures for a sale of all of their assets. The sale process was a condition required by AFA’s lenders to continue financing the companies in bankruptcy.

AFA reports that 98 potential buyers have surfaced so far and that 36 have executed nondisclosure agreements. However, none have yet been chosen by AFA as a “stalking horse” bidder, so the sale process is being conducted, at least for now, as an open or “naked” auction.

 

A hearing on the requested procedures is set for May 8, 2012. AFA’s proposed procedures include: 

·         AFA will have until May 29, 2012 to obtain one or more letters of intent. 

·         Potential bidders would have until noon on June 11, 2012 to submit “qualified bids.”

·         If more than one qualified bid is received, an auction will be held at 10:00 a.m. on June 12, 2012, at the office of AFA’s counsel in Delaware.

·         AFA would have until 24 hours before the auction to choose a stalking horse against which other bidders would compete at the auction. If a stalking horse is chosen, a copy of the proposed asset purchase agreement will be filed with the Bankruptcy Court. A stalking horse may be provided with certain “bid protections” if approved by the Bankruptcy Court, including topping fees, asset mix requirements (to deter piecemeal purchases), and minimum overbids.

·         Qualified bids must include, among other things:  (a) a list of assets to be purchased, (b) the purchase terms, (c) a form of asset purchase agreement (or a redline against any stalking horse agreement), (d) a waiver of financing and due diligence contingencies, (e) an irrevocable offer until the earlier of July 25, 2012 or two business days following a sale; (f) a commitment to close by June 22, 2012; (g) a commitment to prepare evidence necessary to prove good faith under the Bankruptcy Code; (h) evidence of the buyer’s ability to provide adequate assurance of performance of any contracts to be assumed as part of the sale; and (i) a deposit of 10% of the proposed purchase price.

·         Due diligence is available upon execution of an acceptable nondisclosure agreement and proof of financial ability to close.

 

Parties have until April 30, 2012 to file any objections to the procedures.

 

If you are interested in participating in the sale process or would like a full copy of the proposed bidding procedures, please contact Brandy Sargent at (503) 294-9888 or David Levant at (206) 386-7601.