BANKRUPTCY (CREDITOR)
The Committee of Unsecured Creditors (Committee) engaged ESBA as financial advisor in the Chapter 11 case of a bankrupt telecommunications equipment manufacturer. ESBA quickly assessed the operations of the business and advised the Committee that the Debtor was consuming the estate’s assets at a rapid pace, had limited prospects for survival in Chapter 11 and questionable prospects if reorganized.
Despite falling sales and mounting losses, management crafted a Plan of Reorganization (PLAN) that included retaining ownership for public shareholders and an extended payout to unsecured creditors potentially amounting to 100% of the allowed claims. The plan, while unacceptable to the Committee, provided a basis for developing a much more acceptable alternative Plan with a 100% distribution in a much shorted time frame.
ESBA recommended that the Committee require a substantial initial cash payment to ensure a partial distribution. We also proposed the Debtor pay the deferred portion of the claims with the Debtor’s publicly traded common stock sufficient to produce a dividend, coupled with cash payment, equal to the 100% distribution originally proposed.
After a brief but very intense negotiation, the Debtor assented to the Committee’s proposal in all essential aspects. The Plan of Reorganization was confirmed by the Court and the cash distribution made. The common shares were distributed one year after the Plan confirmation date. |