Project Jarrowfield — Section 363 Asset Sale
A 1.5-hour Distressed M&A / 363 Sale case study with a complete model answer
Modeled After
PJT Partners
A sell-side asset teaser run inside Chapter 11 with zero valuation exhibits — asset maps, operating statistics and a two-stage process timeline with indication-of-interest and data-room dates — in which the bankruptcy itself is framed as a feature because it delivers free-and-clear title
Structure and exhibit set are modeled after PJT Partners. The company, the financials and every figure in this case are entirely our own.
The Situation
Jarrowfield Offshore Services, Inc. S.
Jarrowfield Offshore Services
- Sector
- Offshore energy services — marine logistics and subsea support for deepwater and shelf operators, run through a 24-vessel owned fleet and an owned Gulf Coast supply base
- Size
- Geography
- United States Gulf of Mexico, operated from the owned Ardsley Point supply base in Terrebonne Parish, Louisiana and a leased quay at Tessington, Texas
- Ownership
- Situation
The Prompt
You are the financial advisor to Jarrowfield Offshore Services, Inc.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
Situation overview and the Board's request
PDFUnlockFleet and asset schedule with the marine appraisal
PDFUnlockStalking horse proposal letter and DIP term sheet
PDFUnlockContracts, cures, liens and counsel's registry memorandum
PDFUnlockSection 363 sale precedent extract
XLSXUnlock
Confidential Information Memorandum
Unlock this case study to read the supporting materials
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 90 minutes.
PART 1
The stalking horse consideration, taken apart
PART 2
Bid protections, sized against something the estate can pay
PART 3
Auction mechanics and the price of entry
PART 4
Credit bidding under section 363(k)
PART 5
Free and clear, and why it is the marketing point
PART 6
Assumption, assignment and cure
PART 7
The schedule, against the financing milestones
PART 8
What the estate receives
PART 9
The three documents
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and memo are in the solution set below.
- 01
Read counsel's memorandum before you read anything else
- 02
Separate the credit bid from the cash
- 03
Screen the precedent extract before you take any median
- 04
Design the auction backwards from the first competing bid
- 05
Rank the maritime liens before you rely on the mortgages
- 06
Lay the schedule against the milestones and find what breaks first
- 07
Write the memorandum for a buyer, not for the Board
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Section 363(b) and the sound business purpose test
A sale of substantially all assets outside the ordinary course requires the debtor to articulate a sound business purpose, and the record for it is built from the marketing process, the liquidity runway and the maturity or covenant event that forced the case. Courts look at how long the assets were exposed to the market, how many parties were contacted, and whether the process was run before the petition as well as after it.
The stalking horse and its bid protections
A stalking horse agrees to be the floor bid, sets the terms of the asset purchase agreement other bidders must match, and takes the risk that its own diligence expense is spent producing a market for someone else. Bid protections — a break fee, and reimbursement of documented expenses — are what it is paid for that. They are an administrative expense of the estate and they are approved by the court, so approval turns on whether the estate can pay them out of what the transaction actually brings in, rather than only on whether they are customary.
Overbid increments and the price of entry
The minimum initial competing bid is conventionally the stalking horse consideration plus the break fee plus the expense reimbursement plus a first increment, so that any bid the estate accepts leaves it better off after paying the protections. That sum is the price a second bidder pays for the right to compete, and it is the mechanism by which generous protections chill an auction: every dollar of protection is a dollar the next bidder must beat before the estate sees anything.
Credit bidding under section 363(k)
The holder of an allowed claim secured by property being sold may bid that claim as currency up to its allowed amount, unless the court for cause orders otherwise. The cap is the claim, not the appraised value of the collateral — the appraisal is evidence going to cause. Cause has been found where the extent or validity of the lien is disputed, where the credit bid would chill the auction, and where the secured party is bidding against assets it may not have a perfected lien on.
Free and clear under section 363(f)
A sale free and clear requires one of five conditions for each interest: applicable non-bankruptcy law permits it, the holder consents, the price exceeds the aggregate value of all liens, the interest is in bona fide dispute, or the holder could be compelled in a legal or equitable proceeding to accept a money satisfaction. Interests attach to the proceeds in the same order of priority. The price-exceeds-liens limb is unavailable in most distressed sales, and asserting it anyway is the sort of error a committee finds immediately.
Maritime liens and their priority against a ship mortgage
A maritime lien is in rem: it attaches to the vessel rather than to the owner, it survives a private sale, and it can be enforced by arresting the vessel wherever it calls. Under 46 U.S.C. § 31326 a preferred ship mortgage has priority over all claims against the vessel except preferred maritime liens, which 46 U.S.C. § 31301(5) defines to include crew wages, salvage, general average and maritime tort — but not liens for necessaries arising after the mortgage was filed. That split decides which liens rank ahead of the lenders and which rank behind them.
Successor liability and the sale order
Outside bankruptcy, a purchaser of substantially all assets can be pursued on continuity-of-enterprise and mere-continuation theories, which is why buyers price tort exposure into an asset deal or decline it altogether. A section 363 sale order can bar successor liability claims, and that bar is frequently the single largest piece of value a court-supervised sale delivers to a buyer that a private sale cannot.
Assumption and assignment under section 365
A debtor may assume an executory contract and assign it, notwithstanding an anti-assignment clause, if it cures defaults and the assignee provides adequate assurance of future performance. Section 365(f)(1) makes contractual anti-assignment provisions unenforceable; section 365(c)(1) preserves the exception where applicable law, rather than the contract, excuses the counterparty from accepting performance from someone else. Government contracts and licenses conditioned on the identity of the holder generally fall on the wrong side of that line.
Cure costs, and why they are contested
Cure is the amount required to make the counterparty whole for defaults under the contract being assumed. A counterparty that also holds a lien will argue that the lien amount and the cure amount are the same number, because a cure claim is paid in full in cash while a lien is extinguished and attaches to proceeds. The difference between the two figures is a real negotiation and it belongs on the schedule rather than in a footnote.
Section 363(m) and the good faith purchaser
A finding that the purchaser bought in good faith protects the sale from being unwound on appeal. It is not automatic, and it is hardest to obtain where the purchaser is formed by the debtor's own lenders — the record has to show arm's-length negotiation, which in practice means an independent committee running the process and an auction conducted openly and on the record.
The sub rosa plan doctrine
A section 363 sale may not dictate the terms of a plan of reorganization. A sale that allocates proceeds among classes, releases third-party claims or conditions a benefit on a particular treatment of a class is a plan in everything but name, and it will be attacked as one. Funding an estate's wind-down is ordinary; conditioning that funding on how a class is treated is not.
Coastwise trade and citizenship
Vessels engaged in the coastwise trade must be owned by U.S. citizens as defined in 46 U.S.C. § 50501, which for a corporate owner is a demanding test of both ownership and control. It is a bidder qualification rather than a closing condition, because a bidder that cannot satisfy it cannot hold part of the fleet at all, and finding that out at closing is finding it out too late.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and memo, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —363 sale process design
- —Stalking horse bid and bid protections
- —Free-and-clear title as a marketing point
- —Two-stage process timeline
- —Asset-level teaser construction
- —Credit bid dynamics
Answer Deck
Full model answer, banker-formatted
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the memo and the audio walkthrough.
Get StartedDownloads are available to Diamond members
PowerPoint Deck and Memo (PDF) and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Jarrowfield — Section 363 Asset Sale
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why would a buyer prefer to purchase assets inside a bankruptcy rather than outside one?
Because of what the order does. A sale under section 363(f) transfers title free and clear of liens, claims, encumbrances and other interests, with those interests attaching to the proceeds instead, and the order can bar successor liability. Maritime liens are in rem, they attach to the hull rather than to the seller, they survive a private sale whatever the seller warrants, and they can be enforced by arresting a vessel in any port it calls at. A buyer outside bankruptcy takes every one of them. That is why a court-supervised process can produce interest from parties who declined the same assets in a private sale.
Are the bid protections just a market-convention question?
No, and treating them as one is the most common way to get this case wrong. The customary range exists and it is worth knowing, but it is expressed as a percentage of purchase price, and here most of the purchase price is a claim the bidder already owns rather than money the estate receives. The Board is agreeing to pay cash out of an estate whose cash is finite and whose administrative claims come first. The right analysis computes the fee on every relevant denominator, says which one governs and why, and then asks whether the structure can be changed so that the estate's exposure changes rather than only the number.
How do the protections and the increments interact?
They compound. The minimum initial competing bid is conventionally the stalking horse consideration plus the protections plus a first increment, so a competing bidder must clear all of it before the estate is better off. That means the protections are a barrier in every state of the world, whether or not the stalking horse loses. Compute the entry price under the terms as asked for and under whatever you propose instead, and present the difference as a number rather than as an adjective.
What does 'for cause' mean under section 363(k), and does it apply here?
Section 363(k) lets a secured creditor bid its allowed claim as currency unless the court for cause orders otherwise. Cause is not defined, and courts have found it where the extent or validity of the lien is in dispute, where the credit bid would chill bidding, and where inequitable conduct is alleged. The facts to test it against are in counsel's registry memorandum. The argument runs to a defined subset of the assets rather than to the credit bid as a whole, which changes what the bid procedures order should say rather than whether a credit bid is permitted at all.
The company's own lenders are the buyer. Is that a conflict the Board can accept?
It is a conflict the Board has to manage rather than avoid, because in a case like this the lenders are frequently the only party who will fund a facility and the only party who can bid. What the record needs is an independent committee running the negotiation, an auction conducted openly and on the record, protections sized so they do not deter a competing bid, and a bid procedures order that preserves rather than extinguishes any live challenge to the lenders' liens. Those are the terms that make a good-faith purchaser finding available under section 363(m), and they are the terms a strong answer negotiates for.
How long does a 363 process have to be, and who decides?
The financing milestones set the outside dates and the court decides whether the exposure was adequate. Those two constraints pull in opposite directions, which is why the prepetition marketing period matters so much: assets that were in the market for months before the petition can support a compressed postpetition schedule that would be indefensible on its own. Build the table with the headroom on every line, and be able to say what happens if a single hearing is adjourned.
How much of the 90 minutes should go on the information memorandum?
Roughly a third, and it should be the most structured third. The memorandum is the document with the most pages and the least judgment in it: an asset register, operating statistics, contracts, a dated two-stage process and the free-and-clear framing. The presentation and the recommendation carry the judgment and take longer per page. If you are formatting the memorandum at minute eighty-five, the time went to the wrong place.
What legal claims does a strong answer actually make?
A small number, stated exactly. The sound business purpose test and what builds its record; which subsection of section 363(f) carries each interest and which one you are not asserting; the section 363(k) cap and its exception; section 365(f) versus section 365(c) on anti-assignment; the maritime lien priority statutes; and the citizenship requirement for coastwise endorsements. A wrong legal claim in a sale motion is worse than a missing one, so anything that cannot be stated cleanly is better left out.
About This Distressed M&A / 363 Sale Case Study
Distressed M&A / 363 Sale case study for investment banking interviews. 90-minute format covering 363 sale process design, stalking horse bid and bid protections, free-and-clear title as a marketing point. Includes the full prompt, the CIM, a model answer deck, a written memo and an audio walkthrough.
This case study sits in Investment Banking, under Restructuring & Special Situations. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
90-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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