In this legal alert, we highlight an often overlooked strategy for maximizing sale proceeds of a distressed business: a Chapter 11 bankruptcy sale pursuant to section 363 of the Bankruptcy Code.
Background on Avant Gardner (Brooklyn Mirage)
On August 4, 2025, Avant Gardner, LLC (“Avant Gardner”), the operator of Brooklyn Mirage, together with its affiliated entities, filed for bankruptcy protection in the Delaware Bankruptcy Court. Avant Gardner is more than just a single venue, it is one of New York City’s premier nightlife and entertainment destinations.
The sprawling complex brought together three distinct spaces under one roof: Brooklyn Mirage, a massive open-air courtyard famous for summer dance events; The Great Hall, a cavernous indoor venue that drew international DJs and large-scale productions; and Kings Hall, a more intimate performance space that catered to smaller but equally high-energy crowds. Over the years, popular artists like Drake, David Guetta, Black Coffee and John Summit, amongst others, have held events or otherwise performed at the destination.
Despite its popularity and cultural impact, Avant Gardner faced mounting financial pressures arising from high operational costs, pandemic-related disruptions that left lasting scars on live entertainment, and significant debt obligations tied to the upkeep and expansion of the venue.
These pressures ultimately led management to seek the protections of Chapter 11 bankruptcy in hopes of restructuring and preserving value for creditors and stakeholders.
Avant Gardner’s Decision to Sell its Assets
In many cases, a distressed company files for chapter 11 to restructure its operations, reduce its debt, and emerge from bankruptcy as a reorganized entity, often with the same ownership structure. Another popular exit strategy that is often employed is a sale of assets to the party submitting the highest and best bid for assets, which sale can be consummated under the Bankruptcy Code, free and clear of all liens, claims and encumbrances, with such liens, claims and encumbrances to attach to proceeds from the sale. In the Avant Gardner case, the company decided to employ this path forward.
Role of the “Stalking Horse” Bidder
On September 11, 2025, the Delaware Bankruptcy Court entered an order approving bidding procedures for Avant Gardner’s bankruptcy case and authorizing the company to enter into a purchase agreement with an affiliate of its lender, who is serving as a “stalking horse” bidder. In plain terms, a stalking horse is the first bidder at the auction. Stalking horse bidders can be investors that make cash bids or in some cases, such as this one, a lender with a security interest and liens on the debtor’s assets will “credit bid” their secured loans, meaning they can bid up to the amount of their secured claim without putting up new cash. This tool makes lenders strong candidates to become stalking horse bidders, since they are in a unique position to roll their existing debt into the purchase price.
To be approved as the stalking horse, the bidder and the debtor negotiate a purchase agreement that sets the baseline terms of the sale. The bankruptcy court must then review and approve that agreement, ensuring the process is fair to other creditors and potential bidders. Once approved, the stalking horse sets the “floor” for the auction and no subsequent bid can come in below that value.
In Avant Gardner’s case, the court approved AG Acquisition 1 LLC (“Acquisition”) as the stalking horse bidder. As a result, although the creditors committee appointed in the case has reserved all of its rights, Acquisition is permitted to credit bid $110 million for Avant Gardner’s assets, which include all three venues: Brooklyn Mirage, The Great Hall, and Kings Hall. With this approval, Acquisition has secured its position as the lead bidder, and other interested investors now have the opportunity to submit higher or better offers through the court-supervised auction process.
Can Other Investors Still Bid on Avant Gardner Even Though the Stalking Horse Agreement Was Approved?
Absolutely. The fact that the Bankruptcy Court approved the purchase agreement between Avant Gardner and AG Acquisition 1 LLC does not mean the deal is final. The stalking horse agreement simply establishes the opening bid which is the baseline terms against which all other offers will be measured. Unlike a typical private sale outside of bankruptcy, the stalking horse purchase agreement is filed publicly and available for review. This means investors have the rare opportunity to see the exact terms of the initial bid, including the price, structure, and conditions. Armed with this information, prospective buyers can evaluate whether and how they might submit a higher or better offer.
This transparency is one of the features that makes bankruptcy auctions unique: it not only encourages competitive bidding but also gives outside investors a clearer roadmap to what it might take to become the successful bidder and ultimately acquire all of Avant Gardner’s assets.
Who are “Qualified Bidders” and How Can I Bid?
Bidding on Avant Gardner’s assets isn’t as simple as raising your hand at an auction. The Bankruptcy Court has approved a set of bidding procedures that spell out what it takes to become a “qualified bidder.” These procedures are designed to ensure that only serious, capable investors participate in the sale process. To qualify, an investor must submit a formal purchase agreement that complies with the debtor’s requirements, including an overbid of $350,000 above Acquisition’s $110 million initial bid. This often involves a full-scale due diligence review, with access to a data room, after execution of a non-disclosure agreement.
Qualified bidders must also demonstrate that they have the financial capacity to close the deal. This typically requires proof of funds and a good faith deposit, in Avant Gardner’s case, at least 10% of the proposed purchase price. These requirements are meant to weed out speculative bids and make sure the auction proceeds smoothly and credibly.
Deadline for Offer Submissions
In every “Bankruptcy Code section 363 sale”, the Bankruptcy Court sets strict deadlines for when bids must be submitted. In the Avant Gardner case, qualified bidders must submit their offers no later than October 8, 2025, at 12:00 p.m. If Avant Gardner receives one or more qualified bids (other than the stalking horse bid), an auction will be held on October 15, 2025. At that auction, qualified bidders are required to actively participate and improve on their previous bids if they want to remain in the running. These court-supervised timelines ensure that the process is competitive, transparent, and efficient.
Conclusion
A distressed business often faces significant hurdles in selling its assets outside of bankruptcy, especially where secured claims from one or more lenders exceed the actual fair market value of the assets of the business entity. Some purchasers may also be leery about purchasing assets of a distressed entity, fearing successor liability or fraudulent transfer exposure. A chapter 11 case, with an organized section 363 sale process, can overcome some of these challenges, and provide an important forum for investors to purchase assets pursuant to a sale order, thereby avoiding several out-of-court obstacles and risks.
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