Help, My Business is in Trouble! (Series: Restructuring, Insolvency & Troubled Companies)

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Co-Produced by: DailyDAC

Practical and entertaining education for
attorneys, accountants, business owners
and executives, and investors.
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DISCLAIMER
The material in this webinar is for informational purposes only. It should not be
considered legal, financial or other professional advice. You should consult with an
attorney or other appropriate professional to determine what may be best for your
individual needs. While Financial Poise™ takes reasonable steps to ensure the information
it publishes is accurate, Financial Poise™ makes no guaranty in this regard.
About this PowerPoint: if you are looking at this PowerPoint without the benefit of
listening to the conversation that surrounded it then you are doing yourself a disservice.
This PowerPoint was prepared in contemplation of being viewed in conjunction with
listening to a one hour webinar on the topic.
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MEET THE FACULTY
Moderator:
Whitney C. Fogelberg – Kirkland & Ellis LLP
Panelists:
Michael J. Riela – Tannenbaum Helpern Syracuse & Hirschtritt LLP
Jonathan Friedland – Sugar Felsenthal Grais & Helsinger
Jim Bienias – AlixPartners LLP
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ABOUT THIS WEBINAR:
HELP, MY BUSINESS IS IN TROUBLE!
When a business becomes financially troubled, the business owner often experiences denial,
paralysis, or both. Lenders commonly lose confidence and then trust in the business, as
communications tend to break down, deadlines are missed, and promises are broken. Small
business owners commonly have issued personal guarantees, so business failure can often lead to
personal financial stress. The good news is the business and business owner usually has some
options, and even some leverage. This webinar explains what a business owner should- and should
not- consider and do when dealing with financial trouble. Specific topics include discussion of
bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures.
This webinar provides the business owner and her advisors with an overview of various
restructuring and liquidation methods, a framework for how to decide between them, and practical
tips for traversing the difficult environment that is financial distress.
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ABOUT THIS SERIES:
RESTRUCTURING, INSOLVENCY &
TROUBLED COMPANIES
Companies fail all the time, for all sorts of reasons. Some companies become distressed, or even
insolvent, because of mismanagement; others because of fraud; others for myriad other reasons-
some intrinsic to the company and some extrinsic.
Regardless of the cause, failing or failed companies create a unique set of issues, risks, and even
opportunities for all involved. This area of law and finance has become so specialized that no fewer
than five (American Bankruptcy Institute; Association of Insolvency & Restructuring Advisors;
Commercial Law League of America; National Association of Federal Equity Receivers; Turnaround
Management Association) national organizations exist to help those who specialize in the field to
stay up to date on the latest developments, strategies, and tactics in the area.
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EPISODES IN THIS SERIES
3/19/19 Episode #1:
Help, My Business is In Trouble!
4/16/19 Episode #2:
Opportunity Amidst Crisis- Buying Distressed Assets, Claims, and
Securities for Fun & Profit
5/14/19 Episode #3:
Bad Debtor Owes Me Money!
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Dates shown are premiere dates.
All webinars will be available
On Demand approximately 4 weeks
after they premiere.

Episode #1:
Help, My Business is in Trouble!
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STRATEGIC ALTERNATIVES FOR
DISTRESSED BUSINESSES
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STRATEGIC ALTERNATIVES AGAINST
DISTRESSED BUSINESSES
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FACTORS AFFECTING A DECISION
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KEY CONSIDERATIONS DRIVING STRATEGY
⚫ Senior secured creditors’ desired path
⚫ Potential buyer’s desired path
⚫ Presence of personal guaranties
⚫ Whether customers care about company’s financial problems
⚫ Status of company’s relationship to key vendors
⚫ Whether any vendors are irreplaceable as supply sources
⚫ Competition level of company’s industry
⚫ Whether entities affiliated/related to company are not troubled
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ADDITIONAL KEY CONSIDERATIONS
DRIVING STATEGY
⚫ Secured debt
⚫ Real property leases
⚫ Contracts
⚫ Union liabilities
⚫ Pending litigation
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CONSTITUENCIES TO CONSIDER
⚫ Equity sponsor
⚫ Secured lenders
⚫ Vendors
⚫ Customers
⚫ Landlords
⚫ Asset purchaser / Competitors
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FIDUCIARY DUTIES
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FIDUCIARY DUTIES: Gheewalla
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A BUYER'S PERSPECTIVE
⚫ Buyers like to buy cheap & want to avoid risk. But when dealing
with troubled companies:
⚫ Some options are cheaper but carry higher risk;
⚫ Some carry lower risk but are more expensive
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A BUYER'S PERSPECTIVE (cont'd)
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What Risks?

CHAPTER 11 BANKRUPTCY FILINGS
⚫ US Bankruptcy Code: Title 11 of the United States Code
⚫ Basics of Chapter 11:
➔ Petition filed with bankruptcy court (voluntarily or involuntarily)
➔ The debtor, as “debtor-in-possession,” acts as trustee of the business (a “debtor”)
➔ Fixed priority order for creditor distributions
➔ Automatic stay of creditor actions to collect debts
➔ Ability to seek debtor-in-possession (“DIP”) financing
➔ Ability to reject certain executory contracts & leases
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CHAPTER 11 ADVANTAGES
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CHAPTER 11 DISADVANTAGES
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ASSIGNMENTS FOR BENEFIT OF
CREDITORS (“ABCs”)
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ASSIGNMENTS FOR BENEFIT OF
CREDITORS (“ABCs”) (cont'd)
⚫ ABC is a state law remedy, so form of ABC will vary dependent on laws of relevant jurisdiction
⚫ Statutory vs. Common Law ABCs
➔ States may adopt statutes to govern ABCs (e.g. California, Delaware, New York)
✓ State law may set specific requirements Assignee must follow, e.g. claims bar dates for
creditors, form of notice of ABC to creditors, etc.
➔ Others may have no statutory framework, but case law exists to govern ABCs (“Common
Law” ABC) (e.g. Illinois)
✓ Under common law ABC, Assignment is simply a contract between debtor to transfers
title, custody, and control of property to Assignee for sale/liquidation
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ABC ADVANTAGES
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ABC DISADVANTAGES
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CREDITOR COMPOSITIONS /
COMPOSITOIN AGREEMENTS
⚫ Sometimes referred to as “Compositions,” “Creditor Compositions,” or out-of-
court chapter 11s
⚫ Composition Agreement is a contract between a debtor and its creditors
⚫ Participating creditors agree to accept payments specified under agreement in full
satisfaction of their claims against debtor
⚫ Appropriate where business is only capable of reorganizing by a reduction in
overall debt, and creditor body is unified or small enough to make negotiating
feasible
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CREDITOR COMPOSITION ADVANTAGES
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CREDITOR COMPOSITION
DISADVANTAGES
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WORKOUTS
⚫ May be difficult to obtain consent of nearly all creditors as required for a composition,
so company may opt to seek concessions solely from financial creditors (bank,
equipment lessors, bondholders, etc.)
⚫ Workout Agreement restructures debt of a particular creditor
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WORKOUTS ADVANTAGES
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WORKOUTS DISADVANTAGES
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“NAKED” SALE BY DEBTOR
⚫ Debtor sells assets, generally to secured lender, or 3rd party (potentially
its own shareholders) with consent of secured lender.
⚫ Advantages:
➔ Quick and relatively inexpensive method of liquidating a business
➔ May also serve as a quick method for the sale of a company as a going concern
⚫ Disadvantages:
➔ Requires consent of all lienholders
➔ Treatment of and impact on unsecured creditors.
➔ Possibility of being deemed a fraudulent transfer
➔ Breach of fiduciary duty concerns for board of directors of debtor
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ARTICLE 9 SALES
⚫ Fast & inexpensive way to sell secured creditor’s collateral
⚫ Uniform Commercial Code (“UCC”) permits secured party to take possession of
its collateral &, without removing collateral from the debtor’s premises, dispose
of it
⚫ Sale must be commercially reasonable
⚫ Secured party may purchase the collateral at public sale but not at private sale
unless the collateral has a public market where price can be readily ascertained
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ARTICLE 9 SALES (cont'd)
⚫ Secured party must notify debtor, any other guarantors or obligors, & other
junior secured parties
⚫ When rules are followed, all of debtor’s rights in collateral are transferred to
buyer and subordinate security interests are discharged.
⚫ Good faith purchaser for value takes title free and clear even when secured
party fails to strictly comply with statutes
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⚫ Process basics:
➔ Notice of Default and Acceleration of Debt provided by secured party to debtor
and guarantors
➔ Voluntary Repossession Agreement, Replevin Lawsuit or “Self Help”
Repossession (no trespass or breach of peace such as use of physical force or
threats; replevin bonds)
➔ 10-day UCC Notice of Private or Public Foreclosure Sale and Affidavit of Mailing
provided by secured party to each debtor, guarantors, & lienholders identified
from current UCC and tax lien search & potential interested purchasers
➔ Special procedures for tax liens (e.g. federal tax liens require 25-day notice)
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⚫ Additional documentation needed:
➔ Proof of Advertising of UCC foreclosure sale in local newspaper or other
relevant publication (including online)
➔ Power of Attorney from secured party for bidding at UCC public sale
➔ Script of UCC Public Foreclosure Sale or audio/video recording of sale
➔ Bill of Sale from secured party to purchaser
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ABOUT THE FACULTY
WHITNEY FOGELBERG– whitney.fogelberg@kirkland.com
Whitney Fogelberg is a restructuring associate in Kirkland's Chicago office.
Whitney represents both debtor and creditor clients in complex Chapter 11
reorganizations; advises purchasers and sellers in bankruptcy transactions and
acquisitions; counsels boards of directors and senior officers regarding fiduciary
duties and restructuring strategies; and advises financially troubled companies
regarding the structure of various commercial transactions outside of bankruptcy.
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ABOUT THE FACULTY
MICHAEL REILA – riela@tshs.com
Mike Riela is a partner in Tannenbaum Helpern’s Creditors’ Rights and Business Reorganization
practice. With more than 15 years of experience, Mike advises companies on complex restructuring,
distressed M&A, loan transactions and bankruptcy related litigation matters. Mike has in-depth
experience in advising clients on corporate and real estate bankruptcies, workouts, Chapter 11 and
Chapter 7 bankruptcy cases, debtor-in-possession (DIP) and bankruptcy exit loan facilities,
secondary market trading of distressed debt and trade claims, Section 363 sales and bankruptcy
retention and fee agreements and disputes. His clients include banks, administrative agents,
indenture trustees, hedge funds, private equity firms, professional services firms, trade creditors,
contract counterparties, shareholders, debtors and investors.
To read more, go to https://www.financialpoise.com/financialpoisewebinars/faculty/michael-riela/
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ABOUT THE FACULTY
JONATHAN FRIEDLAND – jfriedland@sfgh.com
Jonathan Friedland, a senior partner with Sugar Felsenthal Grais & Helsinger, LLP, views his job simply:
to make money for clients whenever possible and to protect their interests at every turn. Licensed in four
states, Jonathan’s transactional work focusses on representing private funds and other owners of private
businesses, and the businesses they own. He regularly advises on M&A activities, structuring new
ventures and restructuring old ones, and on other commercial relationships. Jonathan is rated AV®
Preeminent™ by Martindale-Hubbell, 10/10 by AVVO, and enjoys several other similar distinctions.
Jonathan graduated from the State University of New York at Albany, magna cum laude (in three years)
and from the University of Pennsylvania Law School. He clerked for a federal judge before entering
private practice and served for several years as an Adjunct Professor of Strategic Management at the
University of Chicago’s Graduate School of Business. Jonathan is lead author and editor of several
significant treatises, several chapters in other treatises, and scores of articles on law and business.
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ABOUT THE FACULTY
JIM BIENIAS – jbienias@alixpartners.com
Jim leverages more than 15 years of experience in working with underperforming and
distressed large and middle-market companies to help navigate a company’s most
challenging situations. Jim’s clients benefit from his experience in working with all levels
of management, including managers, C-level executives and boards of directors as well as
external stakeholders such as banks and private equity investors. Jim excels at turning
data into information and using that information to provide cash flow and financial
forecasts. Previously, he was with FGMK as a managing director. Jim has an MBA from the
University of Michigan’s Ross School of Business and is a Certified Treasury Advisors, a
Certified Insolvency and Restructuring Advisor and a Certified Turnaround Professional.
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QUESTIONS OR COMMENTS?
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IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily
for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education.
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ABOUT FINANCIAL POISE
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Help, My Business is in Trouble! (Series: Restructuring, Insolvency & Troubled Companies)

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