Chapter 11 Bankruptcy Reviewed by Momizat on . Expert Assignments and the Impact of COVID-19 COVID-19 has had a dramatic impact on the global economy. As the economic crisis deepened, the Wall Street Journal Expert Assignments and the Impact of COVID-19 COVID-19 has had a dramatic impact on the global economy. As the economic crisis deepened, the Wall Street Journal Rating: 0
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Chapter 11 Bankruptcy

Expert Assignments and the Impact of COVID-19

COVID-19 has had a dramatic impact on the global economy. As the economic crisis deepened, the Wall Street Journal reported, “The nation’s bankruptcy industry is bracing for a wave of business collapses triggered by the coronavirus pandemic as its ranks have been thinned by a decade of economic growth.” Working on business bankruptcy assignments in 2020 will present a special set of challenges for experts based upon the COVID-19 pandemic. For many industries, and for many individual debtors, there may be a dearth of post-COVID operating information and widely varying views as to the future course of the industry or the national economy as a whole. However, it seems highly unlikely that the bankruptcy courts will, en masse, simply throw up their hands and refuse to confirm plans until better information is available to support projections. Instead, it is far more likely that the bankruptcy courts will accept projections based on a reasonable application of the best information available applying a reasonable methodology. This article addresses three areas of assignment in which financial and economic experts may be called to testify. Those areas are: feasibility, cramdown interest rates, and business valuation in bankruptcy.

COVID-19 has had a dramatic impact on the global economy. In the United States, more than 40 million workers sought unemployment compensation. Individuals and businesses providing litigation support have found 2020 a year of delays. Many are finding the new normal is working from home, providing deposition or hearing testimony by Zoom or similar virtual platforms, and waiting until 2021 for anticipated 2020 trials.

The economic impact brought about by the coronavirus has already led to some firms seeking bankruptcy protection. J. Crew, Gold’s Gym, Neiman Marcus, and Chesapeake Energy are among firms seeking Chapter 11 protection. These firms have said the loss of revenue and potential profits brought about by COVID-19 mandated closures was one of the reasons for their filings.

As the economic crisis deepened, the Wall Street Journal reported, “The nation’s bankruptcy industry is bracing for a wave of business collapses triggered by the coronavirus pandemic as its ranks have been thinned by a decade of economic growth.”[1]

The courts have seen a surge in bankruptcy filings, perhaps not a wave. Struggling small businesses and even larger ones have been kept afloat by government programs like the Paycheck Protection Program and specific industry bailouts. However, these lifelines will only delay the inevitable for many firms if the demand for their products or services do not return to pre-pandemic levels.

“While some companies have been moving into bankruptcy because of the pandemic and its related financial challenges, there has not yet been a glut of cases flooding into court. [Matt Ferris, Haynes and Boone] said that is likely because of an understanding among lenders and borrowers that parties are taking a wait-and-see approach.

‘There hasn’t been just a complete wave of bankruptcy yet because I think people want to give this time to see how bad this is potentially going to be,’ he said. ‘I don’t know that anyone wants to accelerate that … If this continues for an extreme period of time, I think all bets are off.’”[2]

While service industries, like hospitality, retail, and restaurants, have been the ones most obviously hurt by the mandated closures, other industries, like manufacturing and transportation, have also felt the impact of the COVID-19 pandemic. One of the industries greatly impacted by the drop in demand has been the oil and gas industry. With the global economy on pause, airlines reducing flights, and people not driving due to stay at home decrees, the demand for oil collapsed. Even as local and state restrictions ended, the demand for oil and its by-products did not return to pre-COVID levels.

Based on the current economic environment, the phased format for reopening the U.S. economy and the spike in coronavirus cases in various states, most bankruptcy attorneys anticipate a significant number of personal and business bankruptcy filings during the second half of 2020. These bankruptcy firms also anticipate an increased demand for accounting, financial, and economic experts to opine on issues in these bankruptcy cases.

This article addresses three areas of assignment in which accounting, financial, and economic experts may be called to testify.

  1. Feasibility
  2. Cramdown Interest Rates
  3. Business Valuation in Bankruptcy.

Feasibility

The feasibility of a reorganization plan is critical to the court’s decision to confirm or deny a debtor’s reorganization plan.[3] “In their service to the debtor or its creditors, accountants (and other financial experts) have an opportunity to provide value by assisting in the evaluation of the quality and feasibility of the plan of reorganization.”[4]

When a business in Chapter 11 files a reorganization plan, the court’s review must ensure the plan meets certain statutory requirements. Among those requirements is whether the plan shows the debtor has a reasonable chance of survival once the plan is confirmed and has moved out from under the protection of the bankruptcy code. In other words, the plan must be feasible. It must demonstrate the business will be a viable entity, one that is able to pay its bills as it moves forward.

Courts do not need to determine a reorganization plan’s success will be a “sure thing” in order to make a feasibility finding. However, courts do not want to confirm a speculative plan just to find the company back in bankruptcy a second time. If the expert cannot provide a “feasible” financial plan to the court, the reorganization plan may not be approved, and this failure can result in liquidation of the company.[5]

In general terms, a feasibility test is defined as an analysis of the ability to complete a project successfully, taking into account legal, economic, technological, scheduling, and other factors. “Rather than just diving into a project and hoping for the best, a feasibility study allows project managers to investigate the possible negative and positive outcomes of a project before investing time and money.”[6]

Although universally referred to as the feasibility test, the word “feasible” does not appear in the bankruptcy statute. The actual requirement, as reflected in section 1129(a)(11), is that confirmation of the plan is not likely to be followed by liquidation, or the need for further financial reorganization of the debtor, unless the plan is a liquidating plan. In other words, the bankruptcy court does not want to approve a plan which has little chance of success only to see the same debtor back in bankruptcy court a short time later with the same set of financial problems. However, feasibility is not a rigid, formalistic concept. Instead, feasibility is a flexible, elastic concept, driven by the specific facts and circumstances of the case.

A number of cases have explained feasibility as requiring a demonstration that the plan has a reasonable probability of success.[7] This harks back to the familiar mantra of expert testimony that some future event is “more likely than not” to occur. Consequently, the cornerstone of any showing of feasibility is, simply, to demonstrate a probability that the plan will be successful.[8] While a speculative prospect of success is insufficient to support feasibility, a speculative possibility of failure likewise cannot defeat feasibility.[9] A guarantee of future performance is not required[10] and, of course, would be impossible in any event.

As noted, feasibility is a fact driven concept[11] turning on the specific facts and circumstances of each case. However, the projections in support of the plan’s feasibility must be credible.[12] They must be rooted in objective fact and not wishful thinking.[13] Credible projections require both a firm grounding in the facts of the case, as well as the application of a reasonable methodology. This means, whether pre-or post-COVID, feasibility rests on financial projections demonstrating the following:

  • That the plan has a reasonable probability of success; and
  • This must be supported by projections which are credible and based upon objective facts, not wishful thinking.

The first part of a feasibility test in a Chapter 11 matter is similar to one performed on a non-bankrupt company. The analysis should consider the adequacy of the debtor’s capital structure, its earnings power, ability and commitment of management, economic conditions, the current credit markets, and the retention of its clients. In the end, the analysis will determine whether the debtor will be able to have sufficient cash on hand to pay its debts over the proposed repayment period.

In addition, the analysis should consider benefits arising from confirmation of the plan. This may include improving profitability by increasing revenue or reducing expenses and/or eliminating unprofitable products or services.

Finally, the expert needs to be aware of why the company is in bankruptcy. This could be due to external factors (e.g., increased competition or product obsolescence), internal factors (e.g., poor management or undercapitalization), or a combination of both. These factors play an important role in assessing the ability of the debtor to move out of bankruptcy, operate profitably, and pay its debts as schedule in the repayment plan.

Preparing credible feasibility projections for many debtors will present a special set of challenges based upon the COVID-19 pandemic. For many industries, and for many individual debtors, there may be a dearth of post-COVID operating information and widely varying views as to the future course of the industry or the national economy as a whole. However, it seems highly unlikely that the bankruptcy courts will, en masse, simply throw up their hands and refuse to confirm plans until better information is available to support feasibility projections. Instead, it is far more likely that the bankruptcy courts will accept projections based on a reasonable application of the best information available applying a reasonable methodology.

However, post-COVID projections must still be grounded in fact. Obviously, the expert’s problem in the post-COVID environment is to distinguish between objective fact and wishful thinking in an extremely fluid environment. In context, for most plan projections, that will mean justifying the assumptions which underlie the projections. However, there are several things that the financial or economic expert preparing the projections can do to make them as palatable as possible to the bankruptcy court.

First, the projections should incorporate the best available information and the expert should clearly testify to establish this to the bankruptcy court. There may not be a great deal of information available on post-COVID operations in each industry or with respect to a specific debtor. However, so long as the economic expert clearly explains the limitations on the available information, the bankruptcy court has little reason to reject the projections and refuse to confirm the plan. Also, pre-COVID information is not simply irrelevant. The expert may still use that information but may be required, out of necessity, to exercise some significant degree of professional judgment to apply these pre-COVID results to the present operations of the business. Potentially, the economic expert may face objections of ipse dixit[14] in some cases. In that case, the expert may be best served by admitting up-front that there is limited information available and directly explaining to the bankruptcy court that this requires the exercise of the expert’s professional judgment to translate this information into credible projections.

The commitment, strength, and expertise of management is a recognized factor to consider in a feasibility analysis.[15] In many cases, the financial or economic expert may wish to lean on the strength and expertise of management as support for the projections. In addition, the input of management will be a valuable tool to allow the expert to translate limited post-COVID information into credible projections. While management may have its own biases and baggage, management also likely has the best available skills to guide and backstop the expert’s exercise of professional judgment in order to ensure that the projections are well grounded in objective fact. This may be especially helpful where management has a good track record and the bankruptcy filing was caused by COVID-19 related factors as opposed to mismanagement.

For those performing a feasibility test, the Disclosure Statement will contain the debtor’s cash flow projections. An expert preparing or reviewing this projected cash flow must be aware of the reliability of the debtor’s previous cash flow projections. He or she must also consider the reasonableness of assumptions made in estimating future cash flow. To paraphrase the court in Adelphia Communications, a confirmable reorganization plan only works when the debtor has accurate projections of its future cash flow. These projections should not be tainted by fraud and able to show positive cash flows.[16]

For these reasons, “a feasibility opinion should be more than just a ‘rubber stamp’ prepared by the financial expert. The opinion should be credible and reliable, and should give a basis for tis calculations, conclusions, and opinions.”[17]

Cramdown Interest Rates

During the negotiations between debtor and creditor(s) for the repayment of secure debt, the parties may not be able to agree on the repayment terms that would allow the bankrupt firm to emerge from Chapter 11 bankruptcy protection. A hearing before the presiding bankruptcy judge may be needed to set the appropriate repayment terms. In his or her decision, the judge may force the creditor to accept certain repayment terms including the interest rate to be paid on the debt. This process is called cramdown.

The need to determine a cramdown interest rate is generally tied to the repayment of a secured debt, although in some cases may also be tied to unsecured debt. This secured debt may include commercial real estate, like an office building or manufacturing facility, business or production equipment, rolling stock, like trucks or automobiles, and/or other debtor assets that may be used as collateral for a loan.

The following discussion addresses the use of cramdown interest rates in a commercial real estate (CRE) Chapter 11 reorganization. While not the singular area in which cramdown interest rates are addressed, it is a common area in which financial experts are sought to provide an opinion.

When faced with insolvency and/or foreclosure, CRE owners may seek protection under Chapter 11 of the U.S. Bankruptcy Code. The reorganization of a CRE property may be complicated by high loan-to-value (LTV) ratios, insufficient cash flow, and the personal bankruptcy of the persons providing loan guarantees for the CRE project. Due to these complications, the debtor may not be able to negotiate an acceptable interest rate or payment terms for the repayment of each specific claim. To settle these differences, the bankruptcy court will be asked to hold a cramdown hearing at which both sides will argue the structure, terms, and interest to be paid on the debt.

Courts have also noted the necessity of a cramdown hearing means there are no other options for financing the debt. And, because of their being no options, there is no market interest rate that can be researched and applied for the repayment of this debt.

Over the years, courts have looked to various approaches for determining the proper interest rate: presumptive contract rate, coerced loan, cost of funds, and formula. The formula approach has found great support in Chapter 11 matters since the U.S. Supreme Court’s Till decision.[18] While the Till decision was related to secured debt in a Chapter 13 (personal) bankruptcy case, courts have found it to be informative and instructive for determining cramdown rates for secured debt in Chapter 11 cases.

“In both the literature and in many of the cases there is much unfortunate discussion of ‘market rates.’  Markets by definition imply a willing buyer and willing seller. But by definition, cramdown implies an unwilling seller who is compelled by the court to make a loan to the debtor under the plan; also implied is the debtor’s inability to refinance elsewhere (else that would be the plan approach). But not every Chapter 11 plan involving a non-consenting secured creditor is doomed to failure because the debtor cannot refinance. So, more appropriately, markets such as they exist are but one reference point among many in an attempt to find a suitable proxy where no real market exists. That is why most of the case law in this area involves some kind of ‘formula’ approach as discussed by the U.S. Supreme Court in Till v SCS Corp., 541 U.S. 465, 479–80, 124 S, Ct. 1951, 158 L/ Ed. 2d 787 (2004).”[19]

The formula approach is based on the build-up method that is commonly used in finance. It is an additive model in which the rate of return (e.g., interest rate) is estimated as the sum of a risk-free rate plus one or more risk premia. This risk premium is based on the risk of default. “The appropriate size of that risk adjustment depends, of course, on such factors as the circumstances of the estate, the nature of the security, and the duration and feasibility of the reorganization plan.”[20]

For most CRE bankruptcies, an analysis of the circumstances of the estate and the nature of the security will be focused on the same asset, the CRE property. The circumstances of the estate will be assessed based on the current condition of the property.

Should LTV ratios approach or exceed 100% (in other words the debt may be greater than the asset value), a more complex formula approach may be used. This approach falls under the formula approach umbrella and is called the blended rate approach.

The blended rate approach divides a secured claim into levels or tranches with each ascending tranche receiving a greater risk factor than the one prior. These tranches are commonly referred to as senior (first tranche), mezzanine (second tranche), and equity (third tranche). The resulting interest rate factors for each tranche are combined proportionately to provide the blended interest rate. This approach has found wide acceptance in the courts for determining the interest rates on claims with high loan-to-value (LTV) ratios.[21]

The U.S. Supreme Court’s Till decision provides direction to experts and the courts with a safe harbor range of cramdown rates. That range is tied to the formula approach. It is one percent to three percent over the current prime lending rate. As an example, if the current prime lending rate is three percent, the cramdown range would be between four percent and six percent.

With the conclusion of the cramdown hearing, the debtor firm may be one step closer to confirmation and leaving Chapter 11 protection. “Upon confirmation of a plan of reorganization, a new bargain is made, albeit not at arms’ length but under the cramdown provisions of the Bankruptcy Code, and 1129 (b) requires that a creditor simply receive the ‘present value’ of his secured claim for a cramdown confirmation to succeed—there is nothing in the Bankruptcy Code to suggest that this value should change with the debtor’s level of financial solvency, or to require that the present value pay the creditor a contractual profit margin”[22]

Business Valuation

At heart, Chapter 11 is a simple exercise. In bankruptcy parlance, it is to gather the property of the estate, determine the amount and nature of the claim, and confirm a plan of reorganization that distributes the property of the estate to the creditors in accordance with the requirements of the Bankruptcy Code. Inherent in the process is determining the value of the property of the estate and the claim.[23]

Two forms of valuation may be sought in a Chapter 11 matter: the liquidation value of the business’s assets and the going enterprise value of the business or specific assets. Liquidation is normally associated with Chapter 7 of the Bankruptcy Code. Chapter 7 specifically addresses the liquidation of a bankrupt estate. But even under Chapter 11, a liquidation value is needed. This is because the debtor must establish that each claimant in an impaired class has either voted for the reorganization plan or “will receive or retain under the plan on account of such a claim or interest in property of the value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under Chapter 7 of this title on such date.”[24]

The liquidation value is the value of the assets of the business less any expenses for liquidating those assets. The net total is the amount of funds available for distribution relative to the allowed claims; first to the secured, then to the unsecured.

Often, the valuation question is, “What is the value now?” When answering that question, the expert delivers his or her opinion of current value (the valuation date) at a court hearing (the opinion date), and the court decides the current value of the business or asset. In this situation, the valuation date and opinion date are the same.[25]

Valuations may also be related to issues called “avoidance actions.” These actions normally take one of two forms: preferences and  fraudulent transfers. In preference matters, one creditor is paid prior to the bankruptcy to the detriment of the bankrupt estate and therefore the remaining creditors. In these matters, the valuation is to determine if the debtor was solvent when the payment(s) were made.

Fraudulent transfers occur when assets are transferred by the estate prior to bankruptcy that were either to delay or defraud its creditors or were made by the debtor without receiving the reasonable equivalent in exchange. In these matters, the valuation is based on the value of the transferred assets or the debtor’s estate at the time of the transfer.

More often, an expert will be asked to determine the fair market value of the going concern. When a company has been publicly traded, its previous stock transactions provide a starting place. However, most Chapter 11 cases involve smaller, non-publicly traded companies or closely held corporations.

The guidance found in Internal Revenue Service Revenue Ruling 59-60 is useful in determining the fair market value of a small or closely held business. Revenue Ruling 59-60 defines fair market value as “the price at which the property would change hands between a willing buyer and willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.”[26]

This definition of fair market value has been adopted by most courts and is the commonly used definition for fair market value in business appraisal literature. “Court decisions frequently state in addition that the hypothetical buyer and seller are assumed to be able, as well as willing, to trade and to be well informed about the property and concerning the market for such property.”[27]   

Any fair market value analysis should begin with examining the business in three ways: the asset approach, the income approach, and the market approach. The asset approach does not simply apply book value; it determines the market value of the business’s assets less liabilities. The income approach examines the entity’s earnings (e.g., through a discounted cash flow analysis). Through this approach, a value is determined for the firm’s equity based on its ability to generate revenue and net income. The market approach provides a comparative analysis of the value of publicly traded companies that provide the same type of products or services to the company being appraised or data from transactions for the purchase/sale of comparable companies.

In general, the appraiser will accord primary consideration to earnings when valuing stocks of companies which sell products and services to the public; conversely, for the investment or holding type company, the appraiser may accord the greatest weight to the assets underlying the security to be valued.[28]

Some federal court decisions have held that market evidence should be given greater weight than the income approach. The judges in these cases pointed to an expert’s ability to manipulate the discounted cash flow data as a source of concern. Part of this was because the experts were performing their analyses after the events occurred. The courts felt that subsequent facts had clouded the income approach results causing them to be tilted toward whichever party had hired them. Values from relative valuations (particularly those performed at the time of the event (i.e., the bankruptcy date or transfer date) were found to be more reliable and/or easy to understand.

In some situations, the discounted cash flow data that would have been used for assessing value with the income approach were unreliable or unavailable. In these situations, the use of comparable companies and precedent transactions was the only approaches available to an expert.

In re: Adelphia Communications Corp., the judge agreed with an expert not using the income approach. “As a matter of common sense, DCF works best (and, arguably, only) [i] when a company has accurate projections of future cash flow, [ii] when projections are not tainted by fraud, and [iii] when at least some of the cash flows are positive.”[29]

But even the market approach may cause problems for an appraiser. “Multiples are simple and easy to relate to. They can be used in a relative valuation to obtain estimates of value quickly for firms or assets and are particularly useful when a large number of comparable firms are being traded on financial markets and the market is, on average, pricing these firms correctly. They tend to be more difficult to use to value unique firms with no obvious comparables, with little or no revenues, or with negative earnings.”[30]

Appraising the value of a business in Chapter 11 includes the additional complexity of the debtor being in bankruptcy. Experts must consider how will buyers adjust their market value calculations due to the Chapter 11 filing. As one court stated, the business seeking Chapter 11 protection may emerge from bankruptcy but retain the “stench of bankruptcy” for a while. This is something appraisers should include in their analysis.

Conclusion

Working on business bankruptcy assignments in 2020 will present a special set of challenges based upon the COVID-19 pandemic. For many industries, and for many individual debtors, there may be a dearth of post-COVID operating information and widely varying views as to the future course of the industry or the national economy as a whole. However, it seems highly unlikely that the bankruptcy courts will, en masse, simply throw up their hands and refuse to confirm plans until better information is available to support projections. Instead, it is far more likely that the bankruptcy courts will accept projections based on a reasonable application of the best information available applying a reasonable methodology.

As the number of bankruptcy filings grow, financial and economic experts will be contacted to assist in various ways both debtors and creditors. It is the experts’ responsibility to provide fact based, well-reasoned, analyses. These conclusions should not only follow proven methodology and approaches but also include discussions of the limitations on the data due to the current COVID-19 related economic situations.

Courts may be open to provide some flexibility in assessing an expert’s results but will not move away from ensuring the reasonable certainty of the opinions. Experts armed with opinions founded on the best data available and highlighted for their limitations appear to be prepared to provide reasonable and reliable testimony in court.

[1] Bankruptcy Industry Kicks Back Into Gear, Katy Stech Ferex, Wall Street Journal, 5/7/2020, p. A2.

[2] Small Biz Bankruptcy Rules Come Just In Time For Many, Vince Sullivan, Law360, 4/24/2020, www.law360.com.

[3] In re: Northwest Timberline Enterprises, Inc., 348 B.R. 412, (Bankr. N.D. Tex. 2006).

[4] Baldiga, Nancy, “Practice Opportunities in Chapter 11,” CPA Journal, May 1998, The New York State Society of CPAs, www.nysscpa.org/cpajournal/1998/0598.

[5] Suker, Kathleen, “Feasibility Opinions in Bankruptcy Plan Approvals,” Marcum LLP Website, www.marcumllp.com, 2014.

[6] Feasibility Study, Definition, Investopedia, www.investopedia.com.

[7]  Financial Security Assurance, Inc. v. T-H New Orleans Ltd., (In re T-H New Orleans, Ltd.), 116 F.3d. 790, 802 (5th Cir. 1997). Accord, In re Cajun Electric Power Coop., 230 B.R. 715, 745 (Bankr. M.D. La. 1999) (“A key element of feasibility is whether there exists the reasonable probability that the provisions of the plan can be performed”).

[8]  Clarkson v. Cooke Sales & Serv. Co. (In re Clarkson), 767 F.2d 417, 420 (8th Cir. 1985) (Feasibility contemplates the probability of actual performance of the plan, and whether this can be done as a practical matter).

[9]  Cajun Elec. Coop., 230 B.R. at 745.

[10]  Ibid.

[11]  In re St. Cloud, 209 B.R. 801, 809 (Bankr. D. Mass. 1997).

[12]  In re Lakeside Global II, Ltd., 116 B.R. 499, 508 n. 20 (Bankr. S.D. Tex. 1989).

[13]  In re Archdiocese of St. Paul and Minneapolis, 579 B.R. 188, 203 (Bankr. D. Minn. 2017); In re Howard, 212, B.R.864, 879 (Bankr. E.D. Tenn. 1997).

[14] An assertion without proof or simply “because I say so.”

[15]  In re Agawam Creative Marketing Associates, Inc., 63 B.R. 612, 619-20 (Bankr. D. Mass. 1986) (In determining feasibility, the court should consider the ability of management).

[16] In re: Adelphia Communications et al.; Adelphia Recovery Trust v FLP Group, Inc. et al., 2012 U. S. Dist. LEXIS 10864, 15, 2012 WL 264180, 5, (S.D. N.Y. 1/30/2012).

[17] Ibid., Suker

[18] Till v SCS Corp., 541 U.S. 465, 479–80, 124 S, Ct. 1951, 158 L/ Ed. 2d 787 (2004).

[19] In Re: North Valley Mall, LLC, Bankr. LEXIS 1927, *; 53 Bankr. Ct. Dec. 109 (Bankr. C. D. Cal. 2010).

[20] Ibid. Till.

[21] The follow cases discuss the use of the blended rate approach. In re: Texas Grand Prairie Hotel Realty, LLC, 710 F.3d 324; 2013 U.S. App. LEXIS 4514; 57 Bankr. Ct. Dec. 177 (5th Cir. 2013); In re: North Valley Mall, LLC, Bankr. LEXIS 1927, *; 53 Bankr. Ct. Dec. 109 (Bankr. C. D. Cal. 2010).

[22] In re: SJT Ventures, LLC, 2010 WL 3342206 (Bankr. N.D. Tex. 2010).

[23] Sontchi, Christopher, “Valuation Methodologies: A Judge’s View,” ABI Law Review, Vol. 20:1, 2012, page 1.

[24] 11 U.S.C. 1129 (a)(7)(A)(ii).

[25] Ratner, Ian, Stein, Grant, and Weitnauer, John, Business Valuation and Bankruptcy, John Wiley & Sons, Inc., 2009, p. 5.

[26] Revenue Ruling 59-60, Section 2.02.

[27] Ibid., Sec. 2.02.

[28] Ibid., Sec. 5(a).

[29] Ibid., In re: Adelphia Communications et al.

[30] Ibid., Sontchi, p. 10.


Allyn Needham, PhD, CEA, is a partner at Shipp Needham Economic Analysis, LLC, a Fort Worth-based litigation support consulting expert services and economic research firm. Prior to joining Shipp Needham Economic Analysis, he was in the banking, finance, and insurance industries for over twenty years. As an expert, he has testified on various matters relating to commercial damages, personal damages, business bankruptcy, and business valuation. Dr. Needham has published articles in the area of financial and forensic economics and provided continuing education presentations at professional economic, vocational rehabilitation, and bar association meetings.

Dr. Needham can be contacted at (817) 348-0213, or by e-mail to aneedham@shippneedham.com.

Robert “Bobby” Forshey is a partner in the law firm Forshey Prostok, a Dallas-based firm with offices also in Fort Worth and Houston, TX. He practices in the areas of bankruptcy, business reorganizations and workouts, and creditor’s rights. Mr. Forshey was included in the 2019 Texas Super Lawyers by Thomson Reuters list. The list recognizes no more than five percent of attorneys in each state. Mr. Forshey has been selected in years 2003–2019 by his peers. Forshey Prostok is the only Fort Worth firm recognized in the 2020 edition of the Chambers USA/America’s Leading Lawyers for Business. The firm is recognized in the 2020 Chambers as a leading bankruptcy firm in Texas and is the only “boutique” firm so recognized. Mr. Forshey has been listed in Chambers USA as Leaders in their Field and was recently selected to serve as a Fellow for The Litigation Counsel of America (LCA). Mr. Forshey is Board Certified in Business Bankruptcy by the Texas Board of Legal Specialization and TBLS-Bankruptcy Law Exam Commission.

Mr. Forshey can be contacted at (817) 877-8855 or by e-mail to bforshey@forsheyprostok.com.

Dylan Ross, JD, an associate attorney with Forshey Prostok. He earned his Juris Doctor from the University of Notre Dame Law School in May 2018. Prior to graduating from Notre Dame, Mr. Ross served as a judicial extern to the Honorable Harlin D. Hale, United States Bankruptcy Judge for the Northern District of Texas, where he developed a passion for bankruptcy law. After graduation, Mr. Ross returned home to the Dallas-Fort Worth area.

Mr. Ross’s experience includes analyzing statutes and case law for trials and appeals and drafting pleadings, motions, and discovery requests and responses. Mr. Ross has also assisted in the representation of numerous non-dischargeability actions on behalf of a multi-million-dollar financial institution against commercial debtors for fraud and bad faith filings under Sections 523 and 727 of the Bankruptcy Code. Mr. Ross’s assistance on these matters required him to frequently research and analyze applicable state law for jurisdictions throughout the country as well as communicate with local counsel and debtor’s counsel to reach amicable resolutions in the adversary proceedings.

Mr. Ross can be contacted at (817) 877-8855 or by e-mail to dross@forsheyprostok.com.

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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