The 7th Circuit Court of Appeals affirmed the confirmation of a sale of an ethanol plant in South Bend to a joint venture, rejecting a nonbidder’s claim that the establishment of the joint venture amounted to collusion that spoiled the auction.
Natural Chem Holdings opposed confirmation of the sale of New Energy Corp.’s ethanol plant, which it sold after entering bankruptcy. Maynards Industries Inc. and Biditup Auctions Worldwide Inc. entered a joint venture and won with a $2.5 million bid.
The bankruptcy judge denied Natural Chem’s motion to reconsider because the company hadn’t participated in the auction and thus could not have been harmed. The sale closed and later was confirmed by a District judge.
In In the matter of: New Energy Corporation; Appeal of: Natural Chem Holdings LLC, 13-2501, Judge Frank Easterbrook pointed out that Natural Chem didn’t post the bond to participate, so it wouldn’t prevail no matter what the other bidders did. It couldn’t have been injured as a creditor that stood to receive a reduced payout because Natural Chem is not among New Energy’s creditors.
“… bankruptcy courts are entitled to require cash bids, rather than complex and hard-to-value bids including leases and options. Cash bids are comparable; the sort of bid Natural Chem wanted to make could not easily have been compared against others. Natural Chem chose not to play by the auction’s rules. That was its right — but, because it did not bid, it also was not harmed by the outcome.”
“Natural Chem lacks standing for two independent reasons: it did not bid at the auction, and had it done so it would have been helped rather than harmed if the conduct of which it complains were indeed collusive,” Easterbrook wrote.