Navigating a Chapter 11 bankruptcy and reorganization can be a daunting task, both for the company at issue and for the myriad of stakeholders who often have competing interests. It’s also a process in which valuation expertise is required to assess the relative values of the business under competing scenarios and to demonstrate the viability of the reorganized entity’s proposed capital structure.
A recent article from the New York Times DealBook discusses the impact of a change in the bankruptcy code that makes it easier for multiple stakeholders to put forth competing reorganization plans. Specifically, the change limits a corporate debtor’s “exclusivity” when filing a reorganization plan for a company in Chapter 11 bankruptcy. This is currently playing out in the case of LightSquared, the wireless satellite company which filed for bankruptcy protection in May 2012. The creditors in that case have four different reorganization plans to consider, including one from the banks, one from a hedge fund shareholder, one from an entity controlled by the chairman of Dish Network, and one from the company itself.
Some might argue that four choices are better than one. That may be so, but with more choices also comes additional complexity and an increased need for trustworthy independent financial advisors.
Mercer Capital has performed in-depth financial analyses for clients pursuing bankruptcy reorganization in order to explore strategic alternatives and inform negotiations with various stakeholders. We also assist companies with post-emergence financial reporting requirements such as fresh-start accounting and fair value measurements.
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