Identify Issues In Stalking Horse Asset Purchase Agreement

---
name: identify-issues-in-stalking-horse-apa
task_id: bankruptcy-restructuring/identify-issues-in-stalking-horse-asset-purchase-agreement
description: Ensures a stalking horse asset purchase agreement issues memo consistently applies four analytical elements to each issue — problem identification, legal or contractual basis, impact on the estate, and recommended resolution — with attention to environmental successor-liability risk, material adverse effect carve-out gaps, and alignment between closing deadlines and financing milestones.
activates_for: [planner, solver, checker]
---

# Skill: Identify Issues in Stalking Horse Asset Purchase Agreement

## 1. Subject-matter triage

- This skill is for reviewing a draft stalking horse APA and its supporting transaction documents from the unsecured creditors' committee perspective.
- First determine the transaction’s core deal terms, any sale-process milestones, and whether the APA is the operative purchase agreement or one document within a broader sale package.
- Identify the case posture and the key documents that interact with the APA before analyzing individual provisions.
- If the materials present multiple assets, liabilities, bidders, deadlines, or closing paths, enumerate them first and analyze each separately; do not compress distinct issues into one pass.

## 2. Failure modes the skill is correcting

- The memo identifies issues but does not consistently complete each one with: problem, governing basis, estate impact, and recommended fix.
- The analysis skips the committee’s angle and treats the APA as a generic M&A document rather than a bankruptcy sale instrument affecting unsecured recoveries.
- The memo misses structural walk-away rights, sale-order leverage, financing dependency, or deadline mismatches that can shift risk to the estate.
- The memo overlooks environmental successor-liability risk, bankruptcy carve-out gaps in seller-favorable termination rights, or internal inconsistencies between asset definitions and license-back provisions.
- The memo lists concerns without ranking them, making it hard to separate closing blockers from lesser drafting issues.
- The memo states conclusions without tying them to the controlling bankruptcy, contract, or sale-order doctrine that supports the point.
- The memo does not end with concrete next steps tied to the responsible party and the transaction timetable.

## 3. Legal frameworks / domain conventions that apply

- Use bankruptcy sale and assumption/assignment conventions under the Bankruptcy Code, especially sections governing sale free and clear, executory contracts, and claims treatment where relevant.
- Test closing conditions and termination rights against the practical limits of a stalking horse process: sale-order approval, bidding protection, financing milestones, and outside dates must operate coherently.
- Treat the material adverse effect definition as a negotiated allocation of deal risk; check whether bankruptcy filing, case administration, bid procedures, or sale announcement are carved out where appropriate.
- Review any seller indemnity, assumed-liability, or post-closing cure structure for estate exposure after closing, recognizing that post-closing obligations may be economically hollow if the estate will be depleted.
- Scrutinize minimum cash, financing, and availability covenants for circular default mechanics or buyer-controlled termination triggers.
- Evaluate environmental liability allocations with the understanding that free-and-clear relief may not eliminate all successor or regulatory theories against the buyer.
- Check internal consistency among definitions, schedules, exhibits, purchase price mechanics, assumed liabilities, excluded assets, and any license-back or use-right provisions.
- When the source documents identify a specific governing rule, order, statute, or contractual standard, use that authority by name and section in the analysis; do not rely on generic labels alone.

## 4. Analytical scaffolds

- Start with a short case-and-transaction snapshot if the materials provide it: case name, court, debtor, transaction type, and the role of the APA in the process.
- Build the memo around discrete issues, each framed from the committee’s perspective and ranked by severity on a uniform ordinal scale stated once at the outset.
- For each issue, use the same four-part structure:
  - Problem: what is wrong or incomplete in the APA or related documents.
  - Governing basis: the relevant contractual provision, sale-process document, bankruptcy rule, or other controlling authority.
  - Estate impact: how the issue affects unsecured recoveries, closing certainty, creditor leverage, litigation risk, or later administration.
  - Recommended resolution: the drafting or process fix the committee should seek.
- When a provision turns on a number, deadline, milestone, condition, or exposure amount, tie the issue to the specific source-document figure rather than describing it abstractly.
- Compare the APA against each supporting transaction document that changes rights, timing, economics, or risk allocation; treat inconsistencies as separate issues if they matter independently.
- If the transaction includes more than one bidder, currency, asset group, deadline, or liability bucket, analyze each one expressly and do not assume the same answer applies to all.
- For legal propositions, cite the controlling authority by name and section or by the relevant sale-order / contract provision identified in the materials; state the rule before the conclusion.
- Where the documents are silent on a key risk, flag the omission as a drafting gap and explain why the absence matters in a bankruptcy sale context.
- End each issue with a concrete consequence for the estate or creditors, not just a summary of the drafting defect.

## 5. Vertical / structural / temporal relationships

- Check whether closing conditions, financing milestones, bid-protection mechanics, and the outside date are aligned in time; a shorter termination right can undercut later case milestones.
- Compare any sale-order approval condition with the form of order being negotiated; identify if the buyer has outsized discretion over approval or appeal-related modifications.
- Assess whether cash maintenance covenants, cure deadlines, or interim operating milestones are structured so that the buyer can create or exploit a default.
- Track liabilities and rights vertically across the APA, disclosure schedules, exhibits, bid procedures, sale order, and any ancillary agreements to ensure one document does not negate another.
- If an asset is defined as sold but also subject to a license-back or retained use right, isolate the inconsistency and explain whether title, use, or value is actually transferring.
- If environmental risk is allocated in one place but reserved or excluded elsewhere, identify the upstream/downstream mismatch and the practical limits of free-and-clear relief.

## 6. Output structure conventions

- Write a prioritized issues memorandum from the committee’s perspective.
- Use a clear severity legend once at the top with an ordinal scale such as Critical / High / Medium / Low, and apply it uniformly to every issue.
- Open with a brief case and document overview if the source materials support it.
- Organize the body as numbered issues in descending priority.
- For each issue, include:
  - Severity
  - Problem
  - Governing basis
  - Estate impact
  - Recommended resolution
- Make the recommended resolution specific and action-oriented; avoid vague “review further” phrasing.
- If purchase price components are presented, include a concise summary of the economics and note any internal inconsistencies, without performing unnecessary arithmetic beyond what the source documents require.
- If the materials reveal multiple discrete issues, keep them separate rather than bundling them under one heading.
- End with a Recommended Actions section that identifies the next step, the responsible role, and the relevant timing anchor from the transaction documents or case timetable.
- Keep the memo concise but complete; prioritize transaction-critical defects and issues that could impair unsecured creditor recoveries or closing certainty.