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Selecting the Right Forensic Accountant

Can Effect the Outcome of a Case One of the most critical decisions practicing attorneys have to face is the selection of a forensic accountant. The specialized training and expertise of forensic accountants and the role they play, either as consultants or as expert witnesses, can make the difference in the final outcome of a case. However, it is critical that the right person with the right expertise, trai ...

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5 Things to Know About Chapter 11 Bankruptcy and Valuation

For management teams working through a bankruptcy, there are a number of valuation-related considerations.  Samantha L. Albert, senior financial analyst with Mercer Capital, explains five key concepts for management teams and their advisors to be familiar with when embarking upon a Chapter 11 reorganization. To read the full article in Mercer Capital's Financial Reporting Blog, click: 5 Things to Know About ...

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Consider Market Approach Intellectual Property Valuation Methods

IP Valuation—Beyond the Income and Cost Approach Valuation analysts (“analysts”) are often asked to value debtor company intellectual property (IP) within a business bankruptcy context. Some of the bankruptcy reasons to value IP include the assessment of the following: the debtor’s solvency, a secured creditor’s collateral and protection, the fairness of a Section 363 IP asset sale or license, the debtor’s ...

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Taking a Deeper Look into Momentive, Part 2

Why the Choice Between Prime and Treasury Rate Matters Many bankruptcy practitioners have focused on the recent decisions in Momentive[1] that forced secured creditors to refinance prepetition loans at below market interest rates.  Most of these practitioners’ publications focus on the courts’ findings and the potential implication on future matters.  However, three interesting questions are not addressed i ...

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Taking a Deeper Look into Momentive, Part 1

Secured Creditors Lost Almost $200 Million in Economic Value Due to the Imposition of Below Market Interest Rates Many bankruptcy practitioners have focused on the recent decisions in Momentive[1] that forced secured creditors to refinance prepetition loans at below market interest rates.  Most of these practitioners’ publications focus on the courts’ findings and the potential implication on future matters ...

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Terms of Art

Understanding the Language of Chapter 11 Cramdown This article will examine terms of art used in a Chapter 11 cramdown. These terms go hand in hand during a contested or cramdown hearing. The court will work to assure that the bankruptcy definition of these terms is met before confirming a plan. Any expert expecting to testify at a cramdown hearing should have a working knowledge of their meaning. ...

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Commercial Real Estate, Chapter 11 Bankruptcy

Cram Down Interest Rates (Part I of II) In this two-part series the author provides an overview of the issues confronted by courts and financial experts involved in a commercial real estate (CRE) bankruptcy. In this first part, the author discusses how a financial expert may go about to determine the appropriate interest rate for the underlying claims and analyze the CRE market. In the second part of this s ...

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Financial Experts in Chapter 11 Bankruptcies

Unique Situations from Common Assignments The assessment of interest rates and appraising the value of a business are assignments not limited to bankruptcy work alone. Most financial experts are familiar with the methods required to perform these tasks. Even in the application of these basic analyses, Chapter 11 bankruptcy may present unusual assignments. This article discusses two unique situations that ma ...

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Intellectual Property Valuation for Bankruptcy Purposes

Part I: Three of the 12 Reasons a Valuation Is Needed in Chapter 7, 9, and 11 This two-part article summarizes the various types of intellectual property that valuation analysts (“analysts”) may encounter within a commercial bankruptcy controversy, lists the generally accepted intellectual property valuation approaches, and presents the reasons why analysts may be asked to value intellectual property within ...

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Recommended Change Not Needed for Chapter 11 Cramdown Rates

The Myth of Efficient Market Cramdown Rate In December 2014, the American Bankruptcy Institute issued its Final Report and Recommendations of the Commission to Study the Reform of Chapter 11. The Commission was comprised of 22 professionals. The group included attorneys, academics, financial advisers, and a former bankruptcy judge. After over two years of work, the Commission made more than 200 recommendati ...

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5 Things to Know About Chapter 11 Bankruptcy and Valuation

A Chapter 11 reorganization is a chaotic and challenging time for a distressed company says Samantha L. Albert, a senior financial analyst with Mercer Capital. There are many valuation-related considerations that management teams and financial advisers need to have knowledge of. This article discusses five key concepts to focus on when proceeding with a Chapter 11 reorganization. This article is republished ...

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Buy-Sell Agreement

A Drop-Dead Plan for the Unprepared In this article, Edward Mendlowitz shares his views regarding the importance of having a buy-sell agreement. He proposes a “drop-dead plan” or method that, while imperfect, addresses how owners can arrive at an initial value that does not necessarily require a Conclusion of Value, especially if the owners are not related. Significantly, Mendlowitz stresses the importance ...

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Difficulty with Applying the Contract Rate Approach to Chapter 11 Bankruptcy

A Case Study, Part 2 of 2 In this second part of the article, Dr. Allyn Needham examines post-Till cases from the northern and western districts of Texas, highlights the problems encountered using the Formula Approach, and tests whether the Contract Approach may have provided a better approach and reduced the incidence of litigation where a cramdown is proposed. Ultimately, Dr. Needham proposes that despite ...

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Difficulty with Applying the Contract Rate Approach to Chapter 11 Bankruptcy

A Case Study, Part 1 of 2 In the Till decision, the U.S. Supreme Court selected the Formula Approach to provide a straightforward, familiar, and objective method for determining the cramdown interest rate to be paid on secured claims in Chapter 13 cases, minimizing the need for potentially costly additional evidentiary proceedings. Many bankruptcy courts have found this decision instructive and directive fo ...

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Three Common Roles for Financial Experts

In Chapter 11 Bankruptcies, Part 2 Financial experts may be called on to provide a number of services in Chapter 11 bankruptcy cases. Common among these services is the analysis of the interest rate to be paid on secured claims, the valuing of the bankrupt business or a portion of the bankrupt estate, and the creation or analysis of cash flow projections to assist in determining the feasibility of the reorg ...

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Three Common Roles for Financial Experts

In Chapter 11 Bankruptcies, Part 1 of 2 Financial experts may be called on to provide a number of services in Chapter 11 bankruptcy cases. Common among these services is the analysis of the interest rate to be paid on secured claims, the valuing of the bankrupt business or a portion of the bankrupt estate, and the creation or analysis of cash flow projections to assist in determining the feasibility of the ...

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How GM Stock Holds Value Despite Recalls

  Barely six months into 2014, General Motors (GM) has recalled more vehicles than it sold in the five years since it filed for bankruptcy. In February alone, 2.6 million vehicles were recalled for an ignition problem that’s been attributed to at least 13 deaths. Even so, the GM stock price has remained completely neutral since April. How is the stock valuation immune to such a corporate and public rel ...

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