In Re GSC, Inc.

OPINION AUTHORIZING HEARING ON THE SALE OF ASSETS, ADJOURNING CONSIDERATION OF DISCLOSURE STATEMENT, AND APPROVING SALE OF ASSETS

Before the Court was: (i) the request by the chapter 11 Trustee for the estates of the above-captioned debtors (the “Debtors”) for approval of the Motion for Entry of an Order (A) Authorizing (I) Sale of Assets and Assignment of Executory Contracts Pursuant to Certain Asset Purchase Agreements and a Side Letter Agreement, (II) Tax Indemnification Agreement, (III) Services Agreement, and (IV) Transition Services Agreement, (B) Authorizing the Payment of De Minimis Pre-petition Franchise Taxes, and (C) Granting Related Relief (the “Sale Motion”); and (ii) the request by the minority lenders to the Prepetition Credit Agreement (as defined, infra) (the “Non-Controlling Lenders”) for approval of their Motion for Entry of an Order (I) Approving Disclosure Statement, (II) Approving Form of Solicitation and Notice Materials, (III) Approving Form of Ballot, (IV) Establishing Solicitation and Voting Procedures, (V) Allowing and Estimating Certain Claims for Voting Purposes, (VI) Approving Third Party Consent Materials, (VII) Scheduling a Confirmation Hearing, and (VIII) Establishing Notice and Objection Procedures (the “Disclosure Statement Motion”). Further, the Trustee sought adjournment of the Disclosure Statement Motion and approval of the Sale Motion.

JURISDICTION & VENUE

This Court has subject matter jurisdiction over this proceeding under sections 1334 and 157 of title 28 of the United States Code. This is a core proceeding within the meaning of section 157(b) of title 28 of the United States Code. Venue is proper before this Court pursuant to sections 1408 and 1409 of title 28 of the United States Code.

BACKGROUND

A. Business of the Debtors

GSC was founded in 1994 as a subsidiary of Travelers Group, Inc. to invest in private equity transactions. In 1998, GSC became an independent alternative asset manager, providing debt-focused investment management of alternative assets with a full spectrum of complementary investment product offerings. (Decl. of Peter R. Frank in Support of First Day Motions and Applications and in Compliance with Local Rule 1007-2, ECF No. 9, ¶ 9 [“Frank Decl.”].) GSC offers such investment and advisory services through its principal subsidiary, GSCP (NJ), L.P. (“NJLP”). NJLP has been a registered investment advisor with the Securities and Exchange Commission since March 2001. Through GSCP (NJ) Holdings, L.P. (“Holdings L.P.”), and GSC Secondary Interest Fund, LLC (“SIF”), the Debtors hold investments in certain affiliated in *140 vestment funds. 2

The Debtors focus their business and funds along the following product lines: (i) distressed debt, (ii) U.S. Corporate Debt, (iii) European corporate debt, (iv) European mezzanine lending, and (v) U.S. ABS CDOs. The Debtors generate revenue through management fees, transaction and portfolio monitoring fees, incentive fees, and returns on investments. 3 The Debtors also co-invest in their funds, and are entitled to returns on such investments in accordance with the provisions of the applicable fund documents. Id. at ¶ 17.

GSC is privately owned and has approximately thirty-one (31) full-time employees. At its peak, GSC had $28 billion of assets under management. As of March 31, 2010, GSC had approximately $8.4 billion of assets under management in approximately twenty-eight (28) separately managed investment funds. Id. at ¶ 9.

Before the Petition Date, 4 the Debtors’ executive management and GSC’s board consisted of only two individuals — Alfred C. Eckert III (“Eckert”) and Peter R. Frank (“Frank”). Eckert served as the Chairman and Chief Executive Officer of GSC. (Ex. A to Notice of Filing of Disc. Stmt, for the Joint Chapter 11 Plan for GSC and its Affiliated Debtors Proposed by the Non-Controlling Lenders, ECF No. 612, 10 § II [“Modified Disc. Stmt.”].) Ec-kert owns or controls, directly or indirectly, a substantial number of the shares in several series of common stock issued by GSC. Frank is the Senior Managing Director and President of GSC. Id. at 11 § II.

B. Circumstances Leading to Chapter 11 Filing

As a financial advisory firm, the success of GSC is heavily influenced by both the financial markets and worldwide economic conditions. (Frank Deck ¶ 23.) During 2008 and continuing through the first half of 2009, GSC operated in an extremely unfavorable global business environment, which included, among other things, a lack of liquidity in the credit markets and declining asset values. Id. These factors resulted in a substantial decline in the Debtors’ revenues. In order to address these financial concerns and liquidity issues, starting in 2009, GSC began meeting with certain of its creditors and revealed that it would be unable to repay its debts. Id. at ¶ 26.

On or about February 28, 2007, NJLP, as borrower, and certain affiliate guarantors 5 (collectively, the “Guarantors”) en *141 tered into the Fourth Amended and Restated Credit Agreement (as amended or supplemented, the “Prepetition Credit Agreement”) with UBS AG, Stamford Branch, the Issuing Bank, and other lending institutions. (Ex. A to Decl. of Hugo H. Gravenhorst in Support of Debtors’ Sale Motion, ECF No. 306.) Pursuant to the Prepetition Credit Agreement, NJLP borrowed $193.5 million in term loans and gained access to $56.5 million (subsequently reduced to $38 million 6 ) in revolving credit commitments. In the Prepetition Credit Agreement, pursuant to Section 12.1, all the lenders designated and appointed an administrative agent (the “Administrative Agent”) to take action on their behalf and perform duties outlined in the Prepetition Credit Agreement. Id. at § 12.1. UBS AG, Stamford Branch, was appointed Agent. Id.

Additionally, NJLP entered into a $97 million notional principle and interest rate hedge contract (the “Swap”) with Calyon New York Branch (“CALNY”) that would have matured on February 15, 2012. However, on April 7, 2009, CALNY presented NJLP with a notice of early termination, indicating a termination date of April 14, 2009. The termination payment due from NJLP on April 14, 2009 in the amount of $10,192,828 remains unpaid.

The Prepetition Credit Agreement and the Swap (collectively, the “Prepetition Secured Debt”) are secured by liens in substantially all of the Debtors’ assets pursuant to the Second Amended and Restated Pledge and Security Agreement (the “Security Agreement”), dated as of February 15, 2006. (State Court Answer, Ex. B.) Under Section 1.1 of the Security Agreement, the Guarantors granted security interests to the collateral agent (the “Collateral Agent”), who acts on behalf of all the lenders of the Prepetition Secured Debt. 7 In the event of default by the Guarantors, Section 6.1 gives the Collateral Agent the right to exercise any form of relief to protect or obtain the Collateral for the benefit of the lending institutions. 8

As of the Petition Date, the Debtors were in default under the terms of the Prepetition Secured Debt and owed approximately $209.6 million under the Pre-petition Credit Agreement and $10.2 million on account of the Swap. (Frank Decl. ¶ 20.)

The “Prepetition Lenders,” 9 led by Guggenheim Corporate Funding, LLC (“Guggenheim”), then the Administrative Agent under the Prepetition Credit Agreement *142 and Collateral Agent under the Security Agreement, and a steering committee (the “Steering Committee”) consisting of a subgroup of the Prepetition Lenders, began to negotiate a restructuring with the Debtors pursuant to which the Prepetition Lenders would have canceled their claims against the Debtors in exchange for approximately 35% of the Debtors’ future revenue, ownership of certain fund interests, and a less than 35% share in revenue from new management contracts. (Modified Disc. Stmt. 12 § II.)

They never reached a deal, and in early 2010, Black Diamond Capital Management, LLC (“BDCM”) purchased a small portion of the loans under the Prepetition Credit Agreement and proposed a transaction that would restructure the Debtors in a manner similar to the revenue-sharing proposal negotiated by Guggenheim and the Steering Committee. This proposal also ultimately was rejected.

In the spring of 2010, Guggenheim, the Steering Committee, and the Debtors were in discussions about the Debtors’ filing for bankruptcy under chapter 11 of the Bankruptcy Code and thereafter selling the Debtors’ assets in a section 363(b) sale. (Modified Disc. Stmt. 13 § II.) While negotiations for this proposal were still in place, BDCM bought a controlling stake in the Prepetition Credit Agreement and terminated these discussions. Id. Upon obtaining a controlling stake in the Prepetition Credit Agreement, BDCM appointed Black Diamond Commercial Finance, LLC (“BDCF” or the “Agent” and, with BDCM and its affiliates, “Black Diamond”), a related entity, as Administrative Agent under the Prepetition Credit Agreement and Collateral Agent under the Security Agreement. (Original Disclosure Statement, ECF No. 479, ¶ 3.)

Additionally, Black Diamond executed new employment contracts with Eckert and Frank. (Frank Deck ¶ 28.) On or about July 30, 2010, Eckert entered into a consulting agreement with Black Diamond (the “BD-Eckert Consulting Agreement”) wherein Black Diamond would pay Eckert $3 million for consulting services. The BD-Eckert Consulting Agreement is effective upon the completion of a section 363 sale of assets in bankruptcy court whereby Black Diamond obtains the winning bid of a substantial portion of the assets. (Modified Disc. Stmt. 15 § II.) On or about August 24, 2010, Frank also entered into a confidential employment agreement with Black Diamond to make Frank a senior managing director at Black Diamond, guarantee him payment of $1.2 million annually for two years, and provide him a $1 million forgivable loan. Id. The employment agreement is also effective upon the acquisition by Black Diamond of certain GSC assets in a section 363 sale. Id.

C. Bankruptcy Filing

On August 31, 2010, the Debtors filed for bankruptcy pursuant to chapter 11 of the Bankruptcy Code. The cases are being jointly administered for procedural purposes. (Motion for Joint Admin., ECF No. 2.)

1. Use of Cash Collateral

On the Petition Date, the Debtors filed a motion for authorization to utilize cash collateral (the “Cash Collateral Motion”) to grant adequate protection to the Prepetition Lenders. (ECF No. 8.) In exchange for the consensual use of cash collateral, the Prepetition Lenders required the Debtors to conduct an auction by October 7, 2010 and close a sale by October 25, 2010 pursuant to section 363(b) of the Bankruptcy Code. (Supplemental Decl. of Robert Manzo in Support of Sale of Substantially all of GSC’s Assets, ECF No. 271, ¶ 16 [“Manzo Deck”].) On September *143 2, 2010, the Debtors filed an emergency motion to establish bidding procedures and to sell their assets pursuant to section 363(b) (the “Initial Sale Motion”). (ECF No. 24.) On September 3, 2010, the Bankruptcy Court held a first-day hearing and entered an interim order granting the Cash Collateral Motion.

Shortly after the September 3, 2010 first-day hearing, the Non-Controlling Lenders filed limited objections to the Cash Collateral Motion and the Initial Sale Motion noting that the sale milestones were far too short and would chill interest in the proposed auction. (ECF No. 51.)

On October 8, 2010, the Bankruptcy Court entered a final order granting the Cash Collateral Motion but modifying the sale milestones so the auction would be conducted on or before October 26, 2010, and so that the sale would close on or before December 10, 2010.

2. Auction

From October 26 through October 29, 2010, the Debtors held an auction (the “Auction”) for substantially all of their assets. Twelve bidders attended, plus representatives of the Non-Controlling Lenders. The Auction was conducted at the New York offices of Kaye Scholer LLP (“Kaye Scholer”) 10 and bidder groups were assigned separate break-out rooms. (Manzo Decl. ¶ 29.) Bidders were required to sign an acknowledgment form stating explicitly that they were not engaging in any collusive conduct with any other potential bidders at the Auction. Id. The Auction was initially to be conducted in three phases. Phase 1 was designed to facilitate bulk bids for all or substantially all of the assets. Phase 2 permitted bids for combinations of lots or assets. Phase 3 allowed individuals bids for specifics lots or assets. Id. at ¶ 30.

The first phase of the Auction ended on October 26, 2010, with only one bulk bid for substantially all of the Debtors’ assets, from BDCM, in the amount of $5 million. The second phase of the auction, which included several bidders and various combinations of lots or assets, lasted into the evening on October 26, 2010 and continued on October 27, 2010. Id. at ¶ 31. Late in the second day, the Debtors’ senior financial advisor from Capstone Advisory Group, LLC (“Capstone”), Robert Manzo (“Manzo”), approached representatives of the Non-Controlling Lenders and their counsel and advised that it was his belief that certain of the third-party qualified bidders at the Auction would provide more competitive bids if they were permitted to submit joint bids. Id. at ¶ 32. Manzo indicated that he would not permit joint bidding unless the Non-Controlling Lenders agreed. Id. After several hours of discussions with the representatives of the Non-Controlling Lenders, including their counsel and financial advisors, the Non-Controlling Lenders agreed with the approach. Id. The Non-Controlling Lenders provided written consent to the modification of the auction process.

Thereafter, the auction procedures were modified as follows: (i) all bidders received information on the highest bids for every lot and combination, (ii) all bidders were allowed to speak with other bidders and combine bids to maximize value, (iii) all bidders were allowed in the auction room, and (iv) Capstone and Kaye Scholer provided suggested bid configurations. Id. at ¶ 33. After four rounds under the modified bidding procedures, the highest bid *144 was $190 million by Black Diamond. At that point, Manzo determined that in the fifth and final round, bids would be submitted in closed envelopes and the highest qualified bid would be declared the winner. Id. at ¶ 37.

The fifth and final round produced three bids from a total of four bidders. Sarato-ga Partners, L.P. placed a bid that the Debtors valued at $175.8 million. Sankaty Advisors, LLC (“Sankaty”) placed a bid that the Debtors valued at $193.7 million. BDCM and BDCF placed a joint bid (the “BD Joint Bid”) that the Debtors valued at $235 million, 11 comprised of $5 million cash, a $6 million note, and a credit bid of $224 million. Id. at ¶ 38. After consulting with their advisors, Eckert and Frank selected the BD Joint Bid as the successful bid.

3. Non-Controlling Lenders’ Request for Order to Show Cause

Subsequent to the Auction, the Non-Controlling Lenders petitioned the Court for an order to show cause why the BD Joint Bid should not be disqualified under section 363(k) and another bidder selected the winning bidder. A hearing on that request was held on November 1, 2010. The Non-Controlling Lenders argued that there were still several bidders interested in the assets and requested the Court to reopen the auction. (Order to Show Cause Hr’g Tr. 14: 9-12, November 1, 2010.) As evidence of impropriety at the Auction, the Non-Controlling Lenders argued that Black Diamond’s refusal to permit the Agent to credit bid with any party other than itself was patently in bad faith. The Non-Controlling Lenders argued that if the Agent’s credit bid was made in good faith, the Agent would be willing to bid for the assets regardless of with whom it joined, and by joining with parties other than BDCM, greater value could be conferred upon the estate. (Order to Show Cause Hr’g Tr. 14: 9-12, November 1, 2010.) Moreover, the Non-Controlling Lenders argued that when they executed the agreement to allow joint bidding, they reserved all rights to contest the Agent’s use of the credit bid if it was “exercised in a manner that was detrimental to the Non-Controlling Lenders.” (Order to Show Cause Hr’g Tr. 29: 17-18, November 1, 2010.) Accordingly, they sought to assert this right via an emergency 12 order to show cause before the sale hearing scheduled for December 6, 2010.

The Court denied the request for an order to show cause but gave leave for the Non-Controlling Lenders to raise the issue through an adversary proceeding or at the sale hearing. 13 (Order to Show Cause Hr’g Tr. 38: 3-7, November 1, 2010.)

4. Certain Non-Controlling Lenders Sue Black Diamond

On November 13, 2010, certain of the Non-Controlling Lenders filed a state *145 court action (the “State Court Litigation”) in the New York Supreme Court (“State Court”) against, inter alia, BDCM and BDCF (the “Defendants”.) 14 On that date, the Non-Controlling Lenders stated that they were seeking monetary damages and associated declaratory relief against the Defendants under various legal and equitable theories including breach of contract, breach of duty, and tort for conduct undertaken by the Defendants related to the Prepetition Credit Agreement and Security Agreement.

5. Debtors and Black Diamond Execute and Amend Asset Purchase Agreement

On November 18, 2010, the Debtors filed an executed copy of the Asset Purchase Agreement (the “Initial APA” or “APA”) with the Bankruptcy Court dated as of October 31, 2010 between GSC Acquisition Partners, LLC (“GSCAP”), a vehicle established by Black Diamond, and the Debtors. Section 2.6 of the APA provided that the assets acquired would be allocated pursuant to Exhibits G and H, which divided the assets into “Credit Bid Allocable Items” and “Cash Bid Allocable Items.” (APA 1, Ex. D to Sale Motion, ECF No. 548.)

In response to a conference call with the Court, subsequently discussed at a sale hearing on December 13, 2010 (Sale Hr’g Tr. 20: 23-25, 25: 4-6, December 13, 2010), GSCAP signed a letter agreement providing that both the Credit Bid Alloca-ble Items as well as the Cash Bid Allocable Items would be assigned to and assumed by one purchaser (the “Designated Purchaser” or the “Purchaser”). (APA 1, Ex. D to Sale Motion.) In a counterpart letter, executed the same day as the letter agreement, GSCAP deems GSC Acquisition Holdings, LLC (“GSCAH”), established by BDCF as Collateral Agent, the Designated Purchaser. (Counterpart, Ex. D-2 to Sale Motion.) Significantly, in a side letter (the “Side Letter”) dated May 23, 2011, GSCAH is defined as jointly owned by Black Diamond (in its capacity as GSCAP) and BDCF at closing. 15 (Side Letter, Ex. D to Sale Motion.)

On or about December 3, 2010, prior to approval of the sale, Black Diamond and the Debtors signed an amendment to the APA (the “Amendment”). The Amendment modified the APA to sell additional assets to Black Diamond that were not subject to the Auction 16 and settled a purported dispute over whether BDCM was entitled to certain earnings from the Debtors’ management contracts generated pri- or to the time that Black Diamond would take over management control. (Manzo Decl. ¶ 48.) The Amendment resolved the dispute by awarding Black Diamond $5.2 million, representing 100% of the amounts earned during the two-month period from the Auction date to the projected closing date of the APA under management contracts bought at the Auction. 17 Id. at ¶ 49.

*146 6. Option Agreement

On or about December 4, 2010, Stephen Deckoff, Black Diamond’s Managing Principal, (“Deckoff’) and Eckert entered into an option agreement (the “Option Agreement”). Under this transaction, Black Diamond would pay Eckert $500,000 for an option to purchase for $1.5 million (i) 49% of Eckert’s common stock in GSC Active Partners Inc. (the entity through which Eckert holds its preferred stock in GSCP), and (ii) his $2 million claim against GSC Group related to his unpaid 2008 bonus. (West Decl. Ex. J, ECF No. 338.) The $500,000 was to be paid to Eckert upon the commencement of the BD-Eckert Consulting Agreement. Id. The terms of the Option were exercisable at any time after July 30, 2010 for a period of three years. Id.

On or about December 3, 2010, Black Diamond and Eckert amended the BD-Eckert Consulting Agreement to include additional terms under section 3 Consulting Fees. (West Decl. Ex. H.) The first consulting agreement provided Eckert with an annual $1,000,000 consulting fee, minus any salary received from GSC. (West Deck, Ex. G.) The amended consulting agreement made additional items subject to deductions from Eckert’s consulting fee, including any bonus received from GSC, dividends from GSC or its affiliates, and the $1.5 million paid to Eckert by GSC on or about August, 2010. The agreement also required Eckert to use his best efforts to cause GSC to pay him an annual salary of $1,000,000 so long as GSC has the financial resources to do so and stipulated that any payments by GSC in excess of $1,000,000 will be applied towards his next annual consulting fee. The agreement provided some exceptions to the deduction, including any amount related to the release of medical records, and any amount received with respect to his 2008 bonus from GSC and related claims. (West Decl. Ex. H ¶ 3.)

Lastly, the Debtors filed a motion to amend a settlement originally entered into between Eckert and GSC on or about November 19, 2010 related to Eckert’s ownership of a substantial amount of shares in GSC common stock and several life insurance policies related to Eckert for which GSC was the beneficiary. (West Decl., Ex. I.) The beneficiary rights, valued at $50,000,000, were initially offered for sale at the Auction. No bids were made for those rights since to realize the full value of those rights, Eckert’s consent to release medical records was necessary. In exchange for Eckert’s consent, GSC provided Eckert with $1,500,000 and forgiveness of a $168,917 non-recourse loan Eckert had with GSC. Additionally, the agreement stipulated that Eckert retain control of his common stock in GSC Group until the Debtors assets were sold and required that Eckert waive his right to a $2,000,000 unpaid bonus claim. In December of 2010, Eckert and the Debtors agreed to reduce the amount of consideration from $1,500,000 to $1,000,000 and remove the requirement to waive the $2,000,000 claim. (Eckert Settlement Motion, ECF No. 275.)

7. December 6, 2010 Sale Hearing Never Commenced

On December 6, 2010, Black Diamond and the Debtors appeared before the Bankruptcy Court and sought to proceed with the sale hearing. The Non-Controlling Lenders objected and requested an adjournment in order to provide an opportunity to conduct discovery of the Amendment to the APA. 18 The Bankruptcy *147 Court agreed to adjourn the sale hearing. During discovery, the Non-Controlling Lenders learned of the existence of the Option Agreement. (Modified Disc. Stmt. 22 § III.)

8. Chapter 11 Trustee was Appointed

On December 20, 2010, after information concerning the details of the Amendment and the existence of the Option Agreement were disclosed, the Non-Controlling Lenders filed a motion for the appointment of a chapter 11 trustee (the “Trustee Motion”). (ECF No. 337.) The Trustee Motion referenced the various agreements reached between Eckert and Black Diamond as evidence that there was a conflict of interest in the Debtors’ management and that the parties were without any trustworthy fiduciary to manage the property and affairs of the Debtors or to administer their estates. (Trustee Motion ¶ 2-5.) On December 22, 2010, the Bankruptcy Court took the matter under advisement and the Debtors withdrew their request for approval of their pending sale to Black Diamond. 19 In response, on or about December 27, 2010, BDCF offered to purchase all of the collateral securing the obligation under the Prepetition Credit Agreement other than $1 million for a credit bid of the full amount of the Prepetition Lenders’ secured claims. Id.

On January 5, 2011, the Bankruptcy Court issued a bench ruling on the Trustee Motion which found cause under section 1104(a)(2) of the Bankruptcy Code for the immediate appointment of a chapter 11 trustee and directed the Office of the United States Trustee to appoint a chapter 11 trustee. (ECF No. 374.) The Bankruptcy Court noted that the pre-petition and post-petition actions of Eckert regarding the sale process, including his relationship with Black Diamond, raised numerous concerns about the fulfillment of his fiduciary duties. (Status Hr’g Tr. 4: 8-13, Jan. 5, 2011.) On January 7, 2011, the Office of the United States Trustee filed a notice of appointment of James L. Garrity, Esq. as the chapter 11 trustee (the “Trustee”) (ECF No. 379), and the Bankruptcy Court entered an order approving Garrity’s appointment (ECF No. 380).

At a status hearing on January 13, 2011, the Trustee explained that he was focusing on the sale process and was trying to determine the most efficient means to dispose of the Debtors’ assets. 20 The Court responded that the primary concern giving rise to the Trustee’s appointment was that issues had been raised that brought into question Eckert’s ability to fulfill his fiduciary duties. The Court reaffirmed that the purpose of Trustee’s appointment was not to abandon the result of the Auction entirely, but rather to start from a clean slate and determine the best course of action. 21 At a hearing on March 23, 2011 *148 for an order approving a bonus program for certain of the Debtors’ employees, the Trustee informed the Bankruptcy Court that there had been significant progress made on a section 363 sale transaction with Black Diamond that would likely close in the next couple of weeks. (Hr’g Tr. 11: 23-12: 3, March 23, 2011.)

9. Plan and Disclosure Statement

On April 25, 2011, the Non-Controlling Lenders filed a joint chapter 11 plan for GSC and its affiliated debtors (ECF No. 478, [the “Plan”]), together with a proposed disclosure statement (ECF No. 479, [the “Original Disclosure Statement”].) The Plan contemplates the Debtors’ reorganization whereby the reorganized Debtors (the “Reorganized Debtors”) would continue to service asset management contracts. Pursuant to the Plan, the Prepetition Lenders would become owners of the Reorganized Debtors. Further, the Reorganized Debtors would appoint Sankaty as sub-advisor who would provide management services for a fee equal to 40% of the senior management fees to be earned by the Reorganized Debtors.

On May 23, 2011, certain parties filed objections to the Plan and the Original Disclosure Statement. BDCM filed an objection to approval of the Original Disclosure Statement (BDCM Obj., ECF No. 505) and argued, in relevant part, that the Original Disclosure Statement “should not be allowed to advance until after the Court has considered the Winning Bid [the BD Joint Bid] that [had] now been on file for six months.” (BDCM Obj. ¶ 1.) BDCF filed an objection (BDCF Obj., ECF No. 510) to the adequacy of the Original Disclosure Statement as well as to the facial confirmability of the Plan. Specifically, BDCF argued that the Original Disclosure Statement was “fatally vague and incom-píete.” (BDCF Obj. 7.) In particular, BDCF argued that the Court should not allow the solicitation of a plan which does not describe in detail how the Reorganized Debtors would operate going forward. The Plan is premised on the ongoing management services provided by Sankaty pursuant to a document which was not included in the Original Disclosure Statement. Id. at ¶ 27. BDCF contended that that this document would be crucial. Id. at ¶ 28. In addition, BDCF argued that the Original Disclosure Statement failed to disclose how the Non-Controlling Lenders would obtain investor consent to Sankaty management. Id. at ¶ 29. BDCF also argued that disclosure regarding the Reorganized NJLP New Senior notes was facially inadequate because it did not disclose whether the notes were to be secured or unsecured. Id. at ¶ 36. Further, BDCF contended that the Plan was patently unconfirmable due to improper classification, lack of an accepting impaired class, and an inability to meet the “fair and equitable” requirements of the Code. Id. at ¶¶ 42^4.

Similarly, the Trustee requested an adjournment of a hearing to consider approval of the Original Disclosure Statement and objected to the entry of an order approving the Original Disclosure Statement. With regard to the Trustee’s request for an adjournment, the Trustee noted that he was in the process of negotiating the final terms of a transaction to sell substantially all of the Debtors’ assets to BDCM pursuant to its winning bid at the Auction and that the proposed transaction should be considered first. (Trustee Obj., ECF No. 506, ¶ 2.) The Trustee argued that consideration of the Original Disclosure Statement at a later date would not prejudice the Non-Controlling Lend *149 ers and that approval of the Original Disclosure Statement before consideration of a sale transaction would damage the Debtors’ estate and undermine the confidence of the Debtors’ investors and employees. Id. at ¶¶ 5-6. Additionally, the Trustee objected to approval of the disclosure statement on the grounds that it lacked adequate information, that the Plan appeared to contain at least one fatal confirmation defect, and that confirmation would only benefit the Non-Controlling Lenders. Id. at ¶ 3.

On May 25, 2011, a hearing was held on the Original Disclosure Statement (the “Initial Hearing”). The Trustee stressed the importance of a section 363 sale as opposed to the confirmation of the Plan due to the rapid deterioration of the Debtors’ assets. (Initial Hr’g Tr. 25: 21-24, May 25, 2011.) At that hearing, the Non-Controlling Lenders agreed to address the concerns relating to the adequacy of the Original Disclosure Statement by including a copy of the agreement with Sankaty to provide ongoing management services, as well as by providing information regarding which class would constitute the accepting impaired class. (Initial Hr’g Tr. 50: 6-12, May 25, 2011.) In addition, the Court instructed the Trustee to submit a motion for approval of a sale transaction to Black Diamond and to schedule an interim hearing (the “Interim Hearing”) to determine whether the Original Disclosure Statement should be approved for solicitation or be held in abeyance while the sale process goes forward.

The Non-Controlling Lenders subsequently filed a revised version of the Original Disclosure Statement on May 25, 2011 in response to the objections of BDCM, BDCF, and the Trustee. (ECF No. 521.) Again, on June 13, 2011, the Non-Controlling Lenders filed a further revised version to the Original Disclosure Statement. (ECF No. 565, [the “June 13th Disclosure Statement”].) On June 27, 2011, BDCM, BDCF, and the Trustee filed objections to the June 13th Disclosure Statement. (ECF Nos. 606, 605, 597, respectively.) The Trustee argued that while the Non-Controlling Lenders attempted to address concerns about the adequacy of information contained in the Original Disclosure Statement, the Plan was still patently un-confirmable; therefore, the June 13th Disclosure Statement should not be approved. Further, the Trustee made a second request for adjournment, stating that even if the June 13th Disclosure Statement could be approved, the Court should adjourn consideration of the June 13th Disclosure Statement until after the Interim Hearing. (ECF No. 597, ¶¶ 1-4.) BDCF objected to the June 13th Disclosure Statement, arguing that it still contained insufficient details on the Sankaty management services, that the Plan had tremendous confirmation risk, and that a sale transaction offered the best resolution. (ECF No. 605, ¶ 8.) BDCM objected to the June 13th Disclosure Statement on the grounds that it contained unsubstantiated allegations against BDCM, still failed to provide adequate information regarding the proposed Sankaty sub-advisory agreement, and did not provide adequate information regarding the forecasted recoveries of three purported creditors of SIF. (ECF No. 606, ¶ 3.) The Non-Controlling Lenders filed an omnibus response to the June 13th Disclosure Statement objections (NCL Omni. Resp. to Obj. to Disc. Stmt., ECF No. 610) as well as a further revised version of the June 13th Disclosure Statement on June 28, 2011. (ECF No. 612, [the “Modified Disclosure Statement” or the “Disclosure Statement”].)

10. Trustee’s Motion for Sale of Assets

On June 7, 2011, the Trustee filed a motion seeking authorization by the Bank *150 ruptcy Court to sell substantially all of the estate’s assets pursuant to section 363 of the Bankruptcy Code, and included a proposed sale order (the “Proposed Sale Order”). (Sale Motion, ECF No. 548.) The proposed sale (the “Sale”) primarily consists of two asset purchase agreements and various subsidiary agreements (the “Proposed Transactions”). Id. at ¶¶ 24-32. The main asset purchase agreement (“APA 1”) is based on the results of the prior auction process conducted by the Debtors and the initial asset purchase agreement between the Debtors and BDCM. Id. at ¶ 24. In exchange for substantially all of the assets of the estate, the proposed consideration provided to the Debtors under APA 1 includes (i) a $224 million credit bid by the Agent, (ii) a $6.7 million promissory note, (iii) $5 million cash, and (iv) the assumption of certain liabilities. Id. The Trustee also proposed a second asset purchase agreement (“APA 2”) providing for the sale of the remaining assets of the estate not included in APA 1. Id. at ¶ 31. Should both APA 1 and APA 2 be consummated, all of the estates’ obligations to secured creditors would be satisfied. Id.

In addition to the asset purchase agreements, the Sale Motion includes a Tax Indemnification Agreement, Side Letter, Services Agreement, and Transaction Services Agreement. The Tax Indemnification Agreement requires the Purchaser to indemnify the estates against certain potential tax liabilities that might arise as a result of the consummation of APA 1 and APA 2. Id. at ¶ 25. The Side Letter and the Proposed Sale Order provide that all of the Non-Controlling Lenders’ rights are reserved with respect to any litigation in regard to the Agent’s actions. Id. at ¶ 28. The Services Agreement involves investment management contracts that the Trustee had not assigned in connection with the close of APA 1. Id. at ¶ 29. In particular, it provides that the Debtors retain sufficient fees from the contracts to cover their costs for providing their required services under these contracts during the term of the Services Agreement, but pay any balance to the Purchaser. Id. Finally, the Transaction Services Agreement discusses how the Purchaser is responsible for providing free services to the Trustee in the wind-down process of the estates’ cases in bankruptcy. Id. at ¶ 30.

Prior to the scheduled sale hearing on July 6, 2011 (the “Sale Hearing”), several objections were filed with respect to the Sale Motion. The Non-Controlling Lenders filed the Objection to the Trustee’s Motion for Entry of an Order Authorizing the Sale of Assets arguing, inter alia, that the Sale Motion should be denied because the Trustee failed to present a valid business reason for the Sale because the Sale constituted a sub rosa plan, and because the Non-Controlling Lenders did not consent to the Sale. Further, they argued that the Sale was not in fact the highest and best bid, that the Sale was not better than the Plan, and that the Sale Motion provided insufficient information to assess the price of the assets. Additionally, the Non-Controlling Lenders raised concerns over whether Black Diamond was a good faith purchaser and whether BDCF and BDCM colluded in submitting their joint bid. (NCL Obj. to Sale Motion, ECF No. 642.)

Credit Agricole Corporate and Investment Bank (“Credit Agricole”) filed a limited objection to the Sale Motion on the grounds that three Collateral Management Agreements were not adequately excluded from the Proposed Transactions. (Credit Agricole’s Limited Obj. to Sale Motion, ECF No. 640, ¶ 13.) Credit Agricole is the holder of three notes issued by GSC European CDO I-R S.A., GSC ABS CDO 2006-4u, Ltd., and Cetus ABS CDO 2006-3, *151 Ltd., (collectively, the “Issuers”). Id at ¶ 1. The Issuers own investment portfolios and use the profits from these portfolios to pay the obligations due on the notes. Id. at ¶ 2. Significantly, the three notes are all subject to Collateral Management Agreements, which give the Collateral Manager the authority to exercise its skill and judgment to buy and sell assets for the ultimate benefit of the holders of the notes. (Ex. A to Crédit Agricole’s Limited Obj. to Sale Motion, ¶ 2.) NJLP, one of the Debtors, was designated as the Collateral Manager for the notes in question. Id.

After the Debtors conducted their auction process in October 2010 of substantially all of their assets, the Debtors served note holders with a notice regarding the assignment of the Collateral Manager’s duties to Black Diamond, the winning bidder. (Crédit Agricole’s Limited Obj. to Sale Motion, ¶ 8.) In that notice, the note holders were given a deadline to affirmatively give or withhold consent, after which a holder would be deemed to have consented to the assignment. Id. The Collateral Management Agreements, though, required the issuer and a majority of the holders of the particular note to provide written consent regarding any proposed assignment of the Collateral Manager’s duties to another party. Id. at ¶ 5.

Crédit Agricole argued that the Trustee had not adequately dealt with these Collateral Management Agreements in the Sale Motion. Id. at ¶ 12. Prior to the appointment of the Trustee, the Debtors had agreed to remove the Collateral Management Agreements from the proposed assets to be sold. Id. at ¶ 11. The Trustee discussed in the Sale Motion that the Proposed Transactions did not involve the management agreements addressed by the original objecting investors, including Crédit Agricole. Id. at ¶ 12. The Services Agreement between the Trustee and the Purchaser discusses how the Purchaser will provide collateral management services to the Debtors with respect to any investment management contracts that the Trustee has not obtained the requisite consent to assign to the Purchaser at closing. Id. Crédit Agricole, therefore, requested that the Sale Motion be denied on the basis that it assigns the Collateral Management Agreements to Black Diamond without the prior written consent required by the Collateral Management Agreements. Id. at ¶ 17.

UBS AG, London Branch (“UBS AG”) also filed a limited objection to the Sale Motion on similar grounds to Crédit Agri-cole, but only regarding the note issued by GSC ABS CDO 2006-4u, Ltd., the note to which UBS AG is a holder, and its associated Collateral Management Agreement. (UBS AG’s Limited Obj. to Sale Motion, ECF No. 635, ¶ 5.) In addition to the issues raised by Crédit Agricole regarding consent and assignment of the investment management contract, UBS AG raised a concern regarding the fact that the Collateral Management Agreement was not included in the Sale Motion’s list of assets excluded from the Proposed Transactions. Id. at ¶ 19. The Collateral Management Agreement was included on the list of “Excluded Management Contracts” in the Side Letter to APA 1 but at the same time included on the list of “Assigned Assets” to the Side Letter. Id. at ¶¶ 22-23. UBS AG, therefore, requested that the Court deny the Sale Motion with respect to the assignment of the Collateral Management Agreement and require that the assignment follow the appropriate provisions of the Agreement. Id. at Conclusion.

Applied Insights, LLC, (“AI”) objected to the Sale Motion with respect to contracts between AI and NJLP, one of the Debtors, regarding a software license as well as related products and services pro *152 vided to GSCP. (Applied Insights’ Limited Obj. to Sale Motion, ECF No. 637, ¶ 5.) In the Sale Motion, the Trustee requested assumption and assignment of the relevant contracts to the Purchaser, but one of the contracts, the Software License and Services Agreement, had a cure amount of $87,500. Id. at ¶ 6. AI requested that the Agreement not be included in the Sale Motion until the Debtors paid the cure amount in full. Id.

The Police and Fire Retirement System of the City of Detroit (the “Retirement System”) also filed a limited objection to the Sale Motion, requesting that any independent tort claims they may have against any non-debtor affiliates be preserved. (The Police and Fire Retirement System’s Limited Obj. to Sale Motion, ECF No. 636, ¶ 11.)

At the time of the Sale Hearing, the only objections left unresolved by the parties were that of the Non-Controlling Lenders and AI. The Non-Controlling Lenders’ objections are addressed herein. Further, in the event that the parties cannot reach an agreement regarding AI’s objection, a hearing will be held to determine the cure amount.

11. Further Developments

The Interim Hearing on whether the Plan and Modified Disclosure Statement should proceed was scheduled for June 29, 2011. The day before the Interim Hearing was to commence, the Trustee produced approximately ten thousand pages of documents but could not assure the Non-Controlling Lenders that the documents were not relevant to the matters to be considered at the Interim Hearing. (Interim Hr’g Tr. 6: 1-8, 9: 5-19, 15: 13-19, June 29, 2011.) At the suggestion of counsel for the Trustee in response to the Non-Controlling Lenders’ objection to going forward without opportunity for review of the documents at issue, the Court postponed the Interim Hearing to coincide with the hearing on the Sale Motion scheduled for July 6, 2011. (Interim Hr’g Tr. 19: 17-20, June 29, 2011.) If the Court had determined the Sale Motion should proceed ahead of any consideration of the Disclosure Statement, the hearing on the Sale Motion would then proceed later on July 6, 2011 or on July 7, 2011.

On July 6, 2011 the Court held the Interim Hearing. At the conclusion of the Interim Hearing, the Court granted the request by the Trustee to proceed with consideration of the Sale Motion and to adjourn consideration of the Disclosure Statement Motion. On July 7, 2011, the Court issued a minute order (the “Minute Order”) to that effect. (ECF No. 659.) The Sale Hearing proceeded on July 7, 2011, after which the Court granted the Sale Motion. On July 11, 2011, the Court entered an order authorizing the Sale (the “Sale Order”). (ECF No. 668.) This opinion reflects the basis upon which the was relief granted in those orders. 22

DISCUSSION 23

Proposed Sale was Valid Offer

Before the Trustee may consider whether to move forward with the Pro *153 posed Transactions, the Proposed Transactions must be valid, approvable agreements. The Non-Controlling Lenders argued that the Sale could not be approved because it was predicated on an asset purchase agreement between Black Diamond and the Debtors that had already been terminated. (NCL Obj. to Sale Motion, ¶ 81.) This argument was based on the assertion that the Debtors provided written notice of termination of the Initial APA to Black Diamond. Id. at ¶ 83. 24 The Non-Controlling Lenders further referred to the language of Section 4.4 of the Initial APA, which provides that the APA may be “terminated at any time prior to Closing ... automatically upon occurrence of, entrance into an agreement for, or Bankruptcy Court approval of, an Alternative Transaction,” including the filing of a plan of reorganization that does not contemplate the sale of the acquired assets to GSCAP. Id. at ¶ 85. Therefore, the Non-Controlling Lenders asserted that the Proposed Transactions were entirely new transactions that did not embody the joint bid from the Auction and, as such, could not have been approved because the Non-Controll