Commercial Loans Blog

Commercial REO Sales and the Stalking Horse Bid

Posted by George Blackburne on Wed, May 19, 2010

Stalking Horse Bids Arise in Connection with Bankruptcy Sales

Today I received an email announcing the bankruptcy court-ordered auction of a beautiful office tower in San Francisco. The flyer said the auction was subject to a $35 million stalking horse bid. What on earth is a stalking horse bid?

A stalking horse bid is an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid.

This method allows the distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company's assets. In essence, the stalking horse sets the bar so that other bidders can't low-ball the purchase price.

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Topics: commercial foreclosure, commercial REO, stalking horse bid