Today in the PPI Holdings bankruptcy, the PPI debtors presented their bid procedures motion which sought approval of the procedures by which PPI would sell substantially all of its assets. PPI’s motion also sought approval of a break-up fee for the stalking horse bidder. In support of the break-up fee, PPI cited the Third Circuit’s decision in Calpine Corp. v. O’Brien Envtl. Energy, Inc. (In re O’Brien Envtl. Energy, Inc.), 181 F.3d 527 (3d Cir. 1999).
Given the increase in bankruptcies, break-up fees will continue to be an issue for debtors and creditors alike. The purpose of this post is to take a look at the O’Brien decision and consider when a break-up fee is appropriate, and the factors courts will consider in deciding to award such fees.