Non-Bankruptcy Corporate Workouts & Reorganizations

Generally accepted financial and legal wisdom now says that a financially troubled corporation that needs to restructure its debt is better off in terms of costs and expenditure of time doing so outside of bankruptcy. In a non-bankruptcy workout, the corporations’ debt-holders and possibly its stockholders negotiate and effect changes in the terms and amount of its debt and equity capital, thereby altering the corporation’s capital structure so as to more closely reflect and support its current and projected asset values and cash flows. Workouts reduce the amount of management time diverted from the operation of the corporation’s business and eliminate the substantial administrative expenses, possible impairment of asset values, and uncertainty of outcome that the bankruptcy process usually entails, and both creditors and stockholders may share in any preserved values.

Unfortunately, a workout is difficult to achieve because it almost always requires each participating debt-holder’s consent. Corporations with complex deb structures, particularly those with publicly-held debt, frequently find it impossible to obtain the consent of all or substantially all debtors. Hence the need of such corporations to resort to bankruptcy law, with its provisions to compel a dissenting minority of a class or an entire class of dissenting creditors and e/or equity holders to accept a proposed plan of reorganization.

The firm’s attorneys can guide business through the possibilities of non-bankruptcy business reorganization, while providing the option of compelling resolution through the bankruptcy process.


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