In a move that could raise enough money to cover a more than $100 million settlement of CEO Greg Daily's legal woes, Burton Hills-based iPayment Inc. has put itself up for sale.

Filings from Daily's bankruptcy case reveal that the payment-processing company had started looking for a buyer by April of last year, when the bankruptcy court put attorney Randal Mashburn of Baker Donelson Bearman Caldwell & Berkowitz PC in charge of Daily's affairs as trustee.

The record shows that negotiations with potential acquirers went on until November, when they ceased. At that time, company officials were discussing the prospect of resuming efforts to sell the company after year-end.

Although mentions in the court record of a possible sale first emerged during a discovery dispute last June, iPayment has never publicly revealed that it was in play. The company is privately held, but it files disclosure reports with the Securities and Exchange Commission because it has publicly traded debt.

A possible endgame

Details of the sale process are mentioned in itemized legal bills Mashburn submitted to the court last month. In a motion for payment, the trustee explains why he spent more than 250 billable hours, generating more than $100,000 in fees, just on matters related to the possible sale of iPayment between April and November.

"By far the largest asset of the bankruptcy estate is the debtor's one-third ownership interest in iPayment and its various affiliated entities," Mashburn wrote. "In addition, the bankruptcy estate has potential claims against another one-third interest held by family trusts as well as possible claims relating to interests held by the remaining one-third owner.

"The trustee traveled to Los Angeles and New York on several occasions in connection with sale negotiations and other matters. He has had scores of meetings and conference calls with financial advisors, investment bankers, potential buyers, company management, attorneys for various parties and others."

Mashburn's motion also says he has been involved in "efforts to mediate a global settlement of all matters" which, he writes, "still could occur." The settlement talks so far "reflect a likely distribution in excess of $100 million" to iPayment's creditors.

By far the largest creditor is Auerbach Acquisition Associates Inc., owned by California businessman Douglas Shooker. Daily filed for bankruptcy protection in May 2009 after a Los Angeles jury ordered him to pay Auerbach $300 million in compensatory and $50 million in punitive damages.

Shooker had sued Daily more than seven years earlier, claiming manipulation by Daily had denied him a stake in iPayment when company was in its infancy. It went on to grow into a successful enterprise with a market value that Daily last year estimated to be in excess of $276 million.

Reached by NashvillePost.com, Mashburn was tight-lipped about the propect of iPayment changing hands. "There are filings in the court record that indicate that a sale of the bankruptcy estate's interest in iPayment is one possibility," he said. "Beyond that, it would be inappropriate for me to make any statements about any particular process that may have occurred in the past or might occur in the future."

Mashburn was more forthcoming, however, on the prospect that he might end up suing members of Daily's family, family trusts or iPayment co-owner Carl Grimstad to recover assets shifted to them before the bankruptcy filing.

"Anyone who has reviewed the various filings of Auerbach that gave rise to the employment of a trustee would see that there have been lots of allegations against lots of third parties and parties related to the debtor about various transfers that have occurred in the past," the trustee said.

"In the absence of a broad settlement, I think I would have a fiduciary obligation to pursue some of those matters. We are still evaluating precisely which parties and which claims we believe would merit filing litigation over."

Mashburn said he remains hopeful that he will not have to file those lawsuits.

Efforts to reach attorneys for Daily and Auerbach, as well as an iPayment spokesperson, for this story were unsuccessful.

A dealmaking chronicle

Mashburn's legal bills, available in full at this link, tell a tale of exhaustive and ultimately unsuccessful negotiations last year with prospective buyers that apparently included Cerberus Capital Management, the massive private-equity firm that formerly owned automaker Chrysler.

The entries begin just days after the court named Mashburn as trustee. Among them are the following:

12 April 2010: "Attend meeting at Burton Hills offices of iPayment, Inc. with Afshin Yazdian, executive vice president and general counsel; Carl Grimstad, President; and Greg Gooding of Debevoise & Plimpton, counsel for sale process; to discuss iPayment sale procedures, disclosures, discovery, bidders, timing, etc."

22 April 2010: "Attend series of meetings at iPayment offices in Westlake Village, California, with Greg Daily, nine members of top management of iPayment, prospective bidder, investment banking firm, etc. in connection with presentation relating to potential sale, process for sale, etc. and follow-up discussions with iPayment securities attorney and [M&A advisor] Perella Weinberg Partners."

3 June 2010: "Participate in Perella Weinberg/iPayment weekly update."

18 June 2010: "Review and analysis of latest proposal regarding sale of iPayment."

15 July 2010: "Review latest material relating to iPayment sale prospects and analysis of corporate governance issues relating to operation with no sale. Telephone conference with Greg Gooding, attorney for iPayment. Telephone conference with David Clarke, financial advisor."

23 Aug. 2010: "Review documents regarding exclusivity matter relating to sale and proposed structure of governance in event of sale, and analysis of issues relating to settlement, Auerbach release matter, etc. Telephone conference with Bill Norton. Telephone conference with Greg Gooding regarding iPayment sale issues, etc."

8 Sept. 2010: "Telephone conference with Greg Gooding regarding Cerberus sale issues and related matters."

25 Sept. 2010: "Research and analysis of issues relating to iPayment value in light of efforts by buyer to reduce price...."

27 Sept. 2010: "Attend day-long series of meetings with iPayment business representatives, iPayment attorneys, Perella Weinberg representatives, buyer representatives and attorneys at Debevoise & Plimpton offices in New York relating to negotiations over sale issues, price, etc."

4 Oct. 2010: "Review and analysis of latest developments in iPayment sale, including latest proposal from prospective buyer...."

8 Oct. 2010: "Telephone conference with Greg Gooding, Mike Diz and Michael Grace and review and analysis of suggested proposal from iPayment for counter-offer to Cerberus."

The last five entries are as follows:

18 Nov. 2010: "Telephone conference with Steve Mayer with Cerberus."

18 Nov. 2010: "Review industry materials and other information regarding analysis of potential for increase or decrease in value based on economy, passage of time, etc."

24 Nov. 2010: "Further work on exploring sale options and alternatives, changing structure, potential for different approach regarding payment of expenses of sale, lender consent, etc."

29 Nov. 2010: "Telephone conference with Michael Grace with Perella regarding potential iPayment sale."

29 Nov. 2010: "Further review of economic and industry information in connection with sale prospects, potential buyers, options for re-marketing efforts after year-end, etc."