Out-of-court solutions

Middle market companies experiencing financial distress have tools at their disposal outside of formal bankruptcy. SulmeyerKupetz lawyers are adept at applying out-of-court solutions to insolvency issues when feasible, and our firm has for decades worked with businesses in Southern California and across the country to resolve debt, restructure or transition businesses, facilitate distressed transactions, and manage liquidations.

Out of Court Workouts

Workouts & Out-of-Court Restructuring

SulmeyerKupetz regularly represents businesses facing excessive debt or liquidity crises in negotiating agreements with creditors. This can involve drafting forbearance agreements to provide breathing space or moratoriums agreements suspending payments for a specified period of time, establishing new payment plans different from existing contract terms or judgments through restructuring agreements, abatement, and/or discounting or extending debt. The goal of these agreements is to preserve the value of a given business as a going concern in order to maintain operations and jobs, for the benefit of vendors and creditors, as well as the debtor.

Assignments for the Benefit of Creditors

An assignment for the benefit of creditors (ABC) is a business liquidation device available as an alter¬native to formal bankruptcy proceedings. In many instances, an ABC can be the most advantageous and graceful exit strategy. This is especially true where the goals are (1) to transfer the assets of the troubled business to an acquiring entity free of the unsecured debt incurred by the transferor and (2) to wind down the company in a manner designed to minimize negative publicity and potential liability for direc¬tors and management. The option of making an ABC is avail¬able on a state-by-state basis. Unlike a Chapter 7 liquidation, where an unknown trustee will generally be appointed to administer the liquidation process, the assignor in an ABC can select an assignee with appropriate experience and expertise to conduct the wind-down of its business and liquidation of its assets. In prepackaged ABCs, where an immediate going concern sale will be implemented, the assignee will be involved prior to the ABC going effective.

Managed Liquidations and Other Dispositions

In some circumstances, the best option may be to conduct a liquidation out of court and without the need for an ABC. There are also cases where it may be determined that a consensual surrender of possession or other consensual arrangement should be entered into with a secured lender. In certain situations, there may be other solutions, such as a merger or divestiture, which can be used to address the problems facing a business.

Out-of-Court Solutions

Examples of the firm’s work in out-of-court solutions include:

  • Represented assignees, technology companies, and various other businesses, creditors, and buyers in hundreds of assignments for the benefit of creditors involving going concern business sales and wind-downs.
  • Represented supplier in connection with turnaround and successful sale of pet store chain.
  • Handled contemplated divestiture of Chicago-based steel manufacturing business valued at over $40 million.
  • Developed turnaround plan for distressed advertising agency in Los Angeles. Formulated crisis management strategy, prepared corporate communications, managed creditor relations, and negotiated sale.
  • Created crisis management strategy and negotiated with creditors on behalf of Los Angeles restaurant retail supply company.
  • Won stay to foreclose for lender of Buena Park hotel that remained partially built for over 7 years, enabling the lender to complete construction.
  • Negotiated deal on behalf of beverage business with revenues in excess of $250 million, with secured lender (bank) and tax authority. Facilitated ongoing funding of company and payment plan with tax authority to successfully avoid Chapter 11.
  • Representing buyer in relation to significant ABC, involving the purchase of a grain business including warehouses across the country, inventory, and intellectual property.

Lawyers to Contact:

To find out how we can help you to navigate potential out-of-court alternatives to bankruptcy, please contact our firm by calling the office at 213.626.2311 or by emailing the attorneys below.