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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...

Future Expected Investment Strategy Determines Value of FLP Interest

January 2016 | Issue 83 The estate of Helen P. Richmond held a 23.44% interest in Pearson Holding Co. (“PHC”), a family investment company.  The estate valued this holding at $3,150,000, later adjusted to $5,046,000.  The IRS valued it at $7,330,000.  This difference of opinion was aired in US Tax Court in a case called Estate […] More...

Do Attached Strings Affect the Value of a Gift?

October 2015 | Issue 82 Steinberg v. Commissioner, 145 T.C. No. 7 (Sept. 16, 2015) explores how a contingent liability accepted by a donee can impact the value of a gift for gift tax purposes. Introduction In 2007, Petitioner Jean Steinberg, age 89, entered into a net gift agreement under which she gave her four […] 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.