The fact that an entity to be acquired is going through a bankruptcy process does not change the filing requirements under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”). However, if the entity is going through a bankruptcy under Section 363(b) of the Bankruptcy Code (11 U.S.C. §363(b)), the HSR process is governed by a 15-day waiting period, as opposed to the 30-day waiting period that applies to transactions that are not occurring under Section 363(b) of the Bankruptcy Code.
In informal guidance issued on July 19, 2013, by the Premerger Notification Office (“PNO”) of the Federal Trade Commission (“FTC”), the FTC staff confirmed that only those transactions under Section 363(b) are subject to the shortened waiting period. In that guidance, the FTC staff also noted that, in all bankruptcy transactions, the FTC allows multiple bidders to file an HSR Notification and Report Form, provided that the filing is submitted with a copy of the appropriate bankruptcy court’s order and a contingent affidavit. If there are multiple bidders, and the parties have not entered into a letter of intent prior to the bankruptcy court’s order and HSR filing, the PNO does not require an executed letter of intent, provided that the potential acquirer submits an affidavit describing its good faith effort to acquire the entity subject to the bankruptcy court’s approval. The party filing on behalf of the entity to be acquired is the debtor in possession (although the size-of-parties threshold would be determined by the size of the entity to be acquired).
If the bankruptcy process depletes the assets such that the transaction no longer meets the size-of-transaction threshold, an HSR filing is no longer required. Because this may be highly dependent upon deals and agreements made with creditors, in some cases, the size of transaction is difficult to ascertain until the buyer is approved by the bankruptcy court.