- The Washington Times - Tuesday, July 18, 2000

On-line businesses that sell the assets of bankrupt companies are springing up to convert others' hard times into revenue. They have customer lists full of failed enterprises.

Bid4Assets.com, a Silver Spring, Md., company, is selling everything from domain names of failed dot-com companies to unpaid debt to tangible assets like buildings and art.

"We don't get personal enjoyment out of others' failures. We're just trying to run a business," said Thomas Kohn, chief executive of the privately held company.

They aren't the only ones.

Cambridge, Mass.-based Bankruptcy Exchange and Auction Market Inc. debuted its Web site last week.

"Traditional auctions are very parochial, and we're changing that," Bankruptcy Exchange and Auction Market President Jack Pascal said.

New York-based Ereorg.com will begin Web auctions in August of distressed loans.

The assets of failed companies everything from furniture and computers to unpaid debt reached an estimated $250 billion last year alone, according to Bid4Assets.

The sale and purchase of most of those items is done at traditional auctions, Mr. Pascal said.

But auctions are inefficient because they attract a regional audience and few people bid on the assets companies are forced to liquidate, the emerging Web auction companies argue.

On the Web, the potential audience is larger. The bigger the audience, the greater the chance an asset will be purchased, on-line auctioneers say. More potential buyers also makes bidding more vigorous and can boost the purchase price.

That makes on-line auctions valuable to creditors, because Web deals can help creditors of failed companies recoup more money than they would recover at traditional auctions, Boston-based bankruptcy lawyer Warren Agin said.

The sites that market assets of bankrupt companies aren't specializing in nickel-and-dime trinkets. On Ebay.com, the world's largest on-line marketplace, the average transaction amounts to $40. On Bid4Assets, it amounts to $25,000.

Last month, an auction on Bid4Assets resulted in the sale of the former presidential yacht USS Sequoia, used from the Harding administration in the 1920s forward, until President Carter sold it in 1977.

NorshipCo, a Norfolk-based shipbuilder and dry-docking company, repossessed the 104-foot yacht after its owners, Presidential Yacht Sequoia Foundation, based in Alexandria, Va., failed to pay the $3 million it cost to renovate the vessel.

NorshipCo sold the ship for an undisclosed price but more than $1 million in a sealed bid auction to Sequoia LLC, a group of Texas investors.

Bid4Assets, started with $5 million in capital, makes money by collecting a fee of up to 8 percent for each item sold on its Web site.

Even with a strong economy, 17-month old Bid4Assets already has listed $1 billion worth of assets on its Web site already.

If the economy slows and companies begin failing, business at Bid4Assets, Ereorg.com and Bankruptcy Exchange and Auction Market could flourish.

"We're definitely countercyclical," Bid4Assets Vice President of Development David Marchick said.

With more Internet companies failing, Web auction sites selling assets of bankrupt companies expect more business.

Dot-com companies used to simply close their doors, Mr. Agin said.

Now they are taking advantage of Chapter 11 bankruptcy to sell off assets, reorganize and reopen for business.

"We've not seen that before. They're doing it now because they realize they do have assets," Mr. Agin said.

The intangible assets of dot-coms domain names, patents, copyrights and trademarks are potentially their most valuable assets, Mr. Agin said.

"When it comes to selling a domain name, the Internet is a natural. If you try to think of another way other than the Internet to sell a domain name, your mind just goes blank," he said.

Mr. Agin sold a domain name www.planetrock.com owned by bankrupt Massachusetts-based Internet company WebSecure at an on-line auction on Bid4Assets for $28,000 to a London-based radio group.

If the deep well of venture capital available to dot-coms dries up, the failure rate of the Internet companies will surge, Mr. Marchick predicts.

So will business for the companies swooping in to sell their assets on line.

"We didn't think about [dot-com failures] when we started, but we're starting to get calls and we've shifted resources to handle it," Mr. Marchick said.

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