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THE JUDGE WOULDN’T IGNORE THIS “ROUNDING ERROR”

June 2017 | Issue 86 Background Constellis Group,  Inc. is a private security firm.  In December 2013, the Company formed an Employee Stock Ownership Plan (“ESOP”), which purchased 100% of Constellis’s voting stock.  Wilmington Trust NA was named Trustee of the ESOP.  Less than a year after the ESOP was created, the ESOP sold all […] More...

NEW JERSEY COURT USES VALUATION DISCOUNT TO PUNISH “BAD BOY”

March 2017 | Issue 85 Introduction Richard and Steven Parker are brothers who ran a flower business in Scotch Plains, New Jersey.  Richard is the President of Parker Interior Plantscapes (“PIP”), which installs and services plants and flowers in commercial settings.  Steven is the President of Parker Wholesale Florists (“PWF”), which is a garden center.  […] More...

Dell Appraisal Spawns a Multitude of Valuation Approaches

February 2017 | Issue 84 Introduction A Delaware Chancery appraisal case involving computer company Dell Inc. gave rise to a multitude of valuation measurements.  It is instructive to see how the court sorted through them in coming up with its final appraisal conclusion.  The case is In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS […] More...

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Bankruptcy and Reorganization Valuations

Valuations are often required in connection with bankruptcy and reorganization proceedings. The following are examples of some of the circumstances in which they are needed.

  • A valuation of collateral securing a claim may be needed to determine the adequate protection of the security interest of a secured creditor.
  • A transfer by a debtor may be avoided as a fraudulent transfer if the assets are transferred for less than their reasonably equivalent value. A valuation analysis of the property transferred and the property received in the transfer, and of the solvency of the debtor and the adequacy of its capital, is often required as part of a fraudulent transfer analysis and determination.
  • A valuation of a debtor corporation may be required to demonstrate the feasibility of a proposed plan of reorganization. This might include a consideration of the soundness of the proposed capital structure of the debtor corporation and the reasonableness of the projected cash flow.
  • If the debtor-in-possession (or bankruptcy trustee) is planning a sale or merger of the debtor corporation, a business valuation may be needed to insure that the transaction takes place at a price that is fair to the bankruptcy estate.
  • If existing shareholders will retain an equity interest in a reorganized debtor corporation, it may be necessary to perform a valuation to determine that they have contributed new value in an amount sufficient to justify a new value exception to the absolute priority rule.
  • Prior to filing for bankruptcy protection a company in financial distress may pursue a §363 sale of its assets to satisfy outstanding debt.  A valuation may be requested to estimate value before the sale is attempted.  A valuation expert may also be called on to provide testimony regarding the fairness of the consideration received in a §363 sale.

Hempstead & Co. has considerable experience in performing valuations in the area of bankruptcy and reorganization, and we stand ready to share the benefits of our experience with you.