1. 1

2. 2
Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

4. 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 that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
4

5. Meet the Faculty
MODERATOR:
Thad Wilson - King & Spalding LLP
PANELISTS:
Jonathan Friedland - Sugar Felsenthal Grais & Helsinger LLP
Laura Davis Jones - Pachulski Stang Ziehl & Jones LLP
Candice Kline - Saul Ewing Arnstein & Lehr LLP
Jennifer Mercer - Paladin Management Group
5

6. 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.
6

7. 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.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
7

8. Episodes in this Series
#1: Help, My Business is In Trouble!
Premiere date: 8/12/21
#2: Opportunity Amidst Crisis- Buying Distressed Assets,
Claims, and Securities for Fun & Profit
Premiere date: 9/23/21
#3: Bad Debtor Owes Me Money!
Premiere date: 10/21/21
8

9. Episode #1
Help, My Business Is In Trouble!
9

10. Strategic Alternatives for
Distressed Businesses
10
Chapter 11 Assignment
for the Benefit
of Creditors
Creditor
Composition
Workout Sale by
Debtor

11. Strategic Alternatives Against
Distressed Businesses
11
Foreclosure Receivership Article 9 Sale

12. Factors Affecting a Decision
12
Future of Business
Going Forward
Cost and Length
of Process
Relationship with
Secured Creditors
Number of Creditors and
Amount of Debt
Buyer’s Risk
Tolerance
Size & Nature of
Company
(and whether public/
private/nonprofit)

13. 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
• Broader industry trends, particularly in commodity-based industries
• Whether entities affiliated/related to company are not troubled
• Qualification for “Subchapter 5” status
13

14. Additional Key Considerations Driving Strategy
• Secured debt
• Real property leases
• Contracts
• Union liabilities
• Environmental liabilities
• Pending litigation
• Prior transactions and related limitations periods
• Government bailouts and restrictions
14

15. Constituencies to Consider
• Equity Sponsor/Shareholders
• Secured Lender(s)
• Vendors
• Customers
• Landlords
• Asset Purchaser/Competitors
• Government
• Unions/Employees
15

16. Fiduciary Duties
16
Well-settled that directors of solvent companies generally owe fiduciary
duties to the company and its equity holders.
Also well-settled that directors of insolvent companies owe fiduciary duties
to exercise business judgment in the best interest of the insolvent company.
Grey Area: Directors of companies that are solvent but operating within the
“Zone of Insolvency.”

17. Fiduciary Duties: Gheewalla
17
Before Gheewalla, most
courts followed the general
guidelines set by the Credit
Lyonnais case, which stood
for proposition that once
company enters the “Zone of
Insolvency” directors and
officers owe fiduciary duties to
creditors of a company.
Gheewalla and its progeny
have clarified there is no
change in a director’s duties
when a solvent company
begins operating in the “Zone
of Insolvency” making the
issue of solvency/insolvency
even more critical.

18. 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
• Buyers generally do not like the prospect of an open auction, which is mandated by the
bankruptcy process
• Third-party buyers are wary of credit bidding by secured lenders, so support from secured
lender is usually critical to a successful process
18

19. A Buyer’s Perspective
19
What Risks?
Successor
Liability
Allegations
of Fraudulent
Transfers

20. 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
✓ Recognized sale process allowing buyers to buy “free and clear” of liens, claims
and encumbrances
• “Subchapter 5” small business provisions of Chapter 11 make it easier and cheaper for
small businesses to complete a reorganization in bankruptcy
20

21. Binds All
Creditors
Automatic Stay
(requires all
creditors to cease
collection efforts)
Sales Made
Free and Clear
of Liens, Claims,
Encumbrances,
etc.
Rejection of
Burdensome
Contracts
Certain Tax
Advantages
Chapter 11 Advantages
21

22. Chapter 11 Disadvantages
22
Higher Cost
Than Other
Options
Longer
Process
Reporting &
Disclosure
Requirements
Stigma
Associated with
Bankruptcy

23. Assignments for Benefit of Creditors (“ABCs”)
23
Commonly Like a
Chapter 7 Liquidation
(“operating
assignments”
are possible though)
Debtor Assigns
All Assets to
Independent
Fiduciary for
Creditors
Fiduciary Sells
Assets and
Distributes Proceeds
to Creditors
Distribution Done
Fairly Consistently
with Bankruptcy
Code Priority Scheme

24. Assignments for Benefit of Creditors (“ABCs”)
• ABC is a state law remedy, so form of ABC will vary depending 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 sets 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
24

25. ABC Advantages
25
Generally quick and relatively inexpensive means of liquidating company,
especially compared to Chapter 7 bankruptcy.
Priority of claims is known (with some Assignee latitude.)
Unsecured hold-out creditors encouraged to participate since all of
debtor’s right, title, and interest in assets transferred to Assignee.
Less risk of “Chapter 5”-like clawback/avoidance lawsuits against
creditors.
Independent fiduciary running liquidation process

26. ABC Disadvantages
26
Secured creditors can still foreclose.
Non-uniform law (varies state-by-state.)
Involuntary bankruptcy still possible.

27. Creditor Composition/
Composition 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
27

28. Creditor Composition Advantages
28
May maximize going concern value of the company.
Less expensive that Chapter 11.
No court or trustee oversight.
No Chapter 11 stigma.

29. Creditor Composition Disadvantages
29
Holdouts by creditors unwilling to agree or accept terms.
Debtor may have to impose restrictions on itself to
obtain acceptance.
Long negotiating process.

30. 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 (e.g., secured
loan), a tranche of creditors (e.g., notes or bonds) or multiple tranches of
creditors
30
In exchange, Debtor may be required to sell
assets, grant additional collateral, meet
certain operational benchmarks and/or be
subject to heightened financial reporting.
Generally, Creditor will agree to deferred
payments, extended time of repayment, and/or
reduced total amount of indebtedness.

31. Because consent of all creditors is not required, generally
easier to implement.
Easier to negotiate because typically only 1 party negotiating
with debtor; may not require disclosure of financial condition
to other creditors.
Workouts Advantages
31

32. Secured creditors may have little incentive to renegotiate terms.
Creditors may insist on workout or turnaround consultant
being involved in operation of the business, or impose other
restrictions on cash management or activities of business.
Workouts Disadvantages
32
Potential for “holdouts.”

33. “Naked” Sale by Debtor
Debtor sells assets, generally to secured lender or third 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/voidable transfer
✓ Breach of fiduciary duty concerns for board of directors of debtor
33

34. 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
34

35. Article 9 Sales
• 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.
35

36. Article 9 Sales
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)
36

37. Article 9 Sales
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
37

38. About the Faculty
38

39. About The Faculty
Thad Wilson - ThadWilson@KSLAW.com
Thad Wilson is a Partner in the Atlanta office of King & Spalding LLP and a member of its
Financial Restructuring Practice Group. Ranked by Chambers USA 2021 as “Up-and-
Coming” in Bankruptcy and by Best Lawyers, Thad represents a broad spectrum of clients in
financial restructuring, corporate and insolvency matters, including debtors, secured and
unsecured creditors, and other parties in interest in major Chapter 11 bankruptcy cases. He
has extensive experience representing clients in insolvency-related litigation and disputes.
Thad is a member of the American Bankruptcy Institute, the Turnaround Management
Association (currently a board member of its Atlanta chapter), and the State Bar of Georgia.
Thad was elected to the initial class of Barristers of the W. Homer Drake, Jr. Georgia
Bankruptcy American Inn of Court, and a member of the King & Spalding Atlanta office
leadership team.
39

40. 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 focuses 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.
40

41. About The Faculty
Laura Davis Jones - ljones@pszjlaw.com
Laura Davis Jones is a name partner and the managing partner of the Delaware office of
Pachulski, Stang, Ziehl, & Jones. She gained national recognition as debtor’s counsel in
the Continental Airlines bankruptcy case, and has represented numerous debtors, creditors’
committees, bank groups, acquirers, and other significant constituencies in national chapter
11 cases and workout proceedings. She lectures at national bankruptcy and litigation
seminars, and has authored numerous articles. Laurawas named “Deal Maker of the Year”
by The American Lawyer in 2002 and has also been profiled in The American Lawyer.
Laura has been named continuously by her peers as one of the “Best Lawyers in America”
and as one of the “Best Lawyers in Delaware.”
41

42. About The Faculty
Candice Kline - candice.kline@saul.com
Candice Kline joined Saul Ewing Arnstein & Lehr LLP as a partner in its Chicago office in 2020. The firm is a full-service
national law firm with a vibrant bankruptcy group. Before turning to law, Candice earned an MBA at the University of Chicago
and worked as an experienced corporate and international banker with Citibank and JPMorgan Chase. Her banking
background informs her legal advice and commitment to client service, outstanding litigation outcomes, and practical deal
making.
Candice focuses her practice on commercial disputes, bankruptcy and insolvency matters, and general litigation. Candice has
in-depth chapter 11 experience, including preferences and fraudulent transfer actions, settlements, contract disputes, and plan
and disclosure statement related litigation. She also litigates in chapter 7 cases. Her recent representations include debtors,
trustees, creditors, and investors in cases involving fraud, breach of contract, breach of fiduciary duties, securities fraud, and
civil theft. Candice has also recently guided out of court workouts and assignments.
Candice is active in the turnaround and legal sectors. She is a former director and officer of the Turnaround Management
Association, Chicago/Midwest Chapter; chair of the Business and Securities Law Council and vice chair of the Business Advice
and Financial Planning Council of the Illinois State Bar Association; and a former co-chair and current director of the American
Constitution Society, Chicago Lawyer Chapter. Candice also serves on the advisory board of directors for the Institute for
Business & Professional Ethics at DePaul University.
42

43. About The Faculty
Jennifer Mercer - jmercer@paladinmgmt.com
Communications are a critical factor in any crisis or restructuring, and Paladin is proud to have one of the
best in the business at the helm of our strategic communications team. Jennifer works closely with clients’
management and other advisors to develop and execute successful communication strategies that
strengthen brands, minimize risk and preserve reputation. Over the last two decades Jennifer has held
leadership positions in communications inside high profile corporations, at some of the world’s leading
public relations firms and at other notable restructuring consultancies. She was named a 2021 “Top
Women in Communication” honoree by Ragan/PR Daily, a 2021 “Top Women Dealmaker” by the Global
M&A Network, and a 2020 “PR Person of the Year” by PR News. Jennifer earned her bachelor’s degree
from the University of California, San Diego. She is a member of the Board of Trustees of the Turnaround
Management Association (TMA) and also sits on the board of TMA’s Southern California Chapter as the
Communications Chair, is a board member of CARE (Credit Abuse Resistance Education), and is an
active member of the ABI, ACG and the PRSA. She is a published author and frequent speaker on topics
related to crisis communication.
43

44. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
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.
44

47. ABOUT DailyDAC
DailyDAC.com is the leading source of
information about assignments, article 9,
bankruptcy, receiverships, out-of-court
workouts and vulture investing, designed
for business owners and vulture
investors.
Visit us at www.dailydac.com.
Premium Public Notice Service
DailyDAC’s Premium Public Notice Service helps market
asset sales on behalf of fiduciaries (e.g., Chapter 11 debtors-
in-possession and committees, trustees, receivers,
assignees), secured lenders selling collateral under UCC
Article 9, and auctioneers to a very large and self-selected
group of potential bidders and their advisors. The Service
also assists with noticing other events, deadlines, and
milestones – including tombstones and other press releases.
Our free weekly newsletter, DailyDAC contains our
latest bankruptcy article, current Public Notices and all
opportunistic deals added to our proprietary database
that week. Sign up at:
https://www.dailydac.com/dacyak-weekly-newsletter-signup/

48. About Financial Poise
48
DailyDAC LLC, d/b/a Financial Poise™ provides
continuing education to attorneys, accountants,
business owners and executives, and investors. It’s
websites, webinars, and books provide Plain English,
entertaining, explanations about legal, financial, and
other subjects of interest to these audiences.
Visit us at www.financialpoise.com
Our free weekly newsletter, Financial Poise
Weekly, updates you on new articles published
on our website and Upcoming Webinars you
may be interested in.
To join our email list, please visit:
https://www.financialpoise.com/subscribe/