The Financially Troubled Company

DIP Financing: How Chapter 11’s Bankruptcy Loan Rules Can Be Used To Help A Business Access Liquidity

Bob Eisenbach — Tue, 05 Nov 2013 16:30:25 +0000

Cash Is King. An army may march on its stomach, but for companies, it’s liquidity that keeps the business going. For many companies, typical sources of liquidity, beyond cash flow from sales or other revenue, are (1) financing from banks or other secured lenders, (2) credit from vendors that can reduce immediate liquidity needs, and (3) when needed, loans from owners, investors, or other insiders.

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The Privilege Is All Mine: What Happens To A Corporation’s Attorney-Client Privilege In Bankruptcy?

Bob Eisenbach — Mon, 29 Jul 2013 11:25:03 +0000

It’s well-established that a corporation has an attorney-client privilege and can assert it to keep communications between the corporation and its attorneys confidential. When a corporation is solvent, its officers and directors maintain the right to assert — or waive — the attorney-client privilege on behalf of the corporation, and control who has access to privileged communications.

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Using Chapter 11 Bankruptcy’s Sale Process To Achieve An Exceptional Sale Price

Bob Eisenbach — Mon, 11 Mar 2013 11:56:36 +0000

A Difficult Problem. Imagine that your company is facing a government investigation, requiring you to spend hundreds of thousands of dollars in legal fees and costs, while being threatened with substantially more legal expense. That financial burden is simultaneously starving the company of cash needed to grow the business, and cash balances are heading toward zero. Worse yet, the cloud over the…

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Summer 2012 Edition Of Bankruptcy Resource Now Available

Bob Eisenbach — Thu, 26 Jul 2012 17:57:25 +0000

The Summer 2012 edition of the Absolute Priority newsletter, published by the Bankruptcy & Restructuring group at Cooley LLP, of which I am a member, has now been released. The newsletter gives updates on current developments and trends in the bankruptcy and workout area. Follow the links in this sentence to access a copy of the newsletter. You can also subscribe to the blog to learn when future…

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Forced Into Bankruptcy: The Involuntary Bankruptcy Process

Bob Eisenbach — Thu, 24 May 2012 11:06:27 +0000

When a company is facing financial distress, the question often comes up whether creditors can "force" the company into bankruptcy. Although the answer is more complicated than it may seem, this post aims to sort out what being "forced into bankruptcy" really means (hint: there are two different ways this can happen) and why it matters to companies and creditors. Forced But Voluntary Bankruptcy.

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Delaware Supreme Court Affirms Ruling Protecting Managers Of Insolvent LLCs

Bob Eisenbach — Wed, 14 Sep 2011 14:31:40 +0000

Creditor Derivative Claims Against Fiduciaries Of Insolvent Corporate Entities. In a 2007 decision in North American Catholic Educational Programming, Inc. v. Gheewalla, et al., 930 A.2d 92 (Del. 2007), the Delaware Supreme Court held that directors of an insolvent Delaware corporation could be sued derivatively by creditors for breaches of fiduciary duty. For a discussion of the case…

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Spring 2011 Edition Of Bankruptcy Resource Now Available

Bob Eisenbach — Tue, 22 Mar 2011 14:14:22 +0000

The Spring 2011 edition of the Absolute Priority newsletter, published by the Cooley LLP Bankruptcy & Restructuring group, of which I am a member, has just been released. The newsletter gives updates on current developments and trends in the bankruptcy and workout area. Follow the links in this sentence to access a copy of the newsletter. You can also subscribe to the blog to learn when future…

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New Ruling Finds Important Protection For Managers Of Insolvent Delaware LLCs

Bob Eisenbach — Tue, 16 Nov 2010 12:25:57 +0000

Derivative Claims Against Directors Of An Insolvent Delaware Corporation. With its 2007 decision in North American Catholic Educational Programming, Inc. v. Gheewalla, et al., 930 A.2d 92 (Del. 2007), the Delaware Supreme Court held that directors of an insolvent Delaware corporation could be sued derivatively by creditors for breaches of fiduciary duty. To read that decision, click on the case…

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California Court of Appeal Provides Guidance For Directors Of Financially Distressed California Corporations

Bob Eisenbach — Tue, 23 Mar 2010 16:08:09 +0000

As I have reported over the past several years, Delaware courts, including the Delaware Supreme Court, have addressed the nature of a director’s fiduciary duties when a Delaware corporation is insolvent or in the "zone of insolvency," most notably with the 2007 decision in North American Catholic Educational Programming, Inc. v. Gheewalla, et al., 930 A.2d 92 (Del. 2007). To read that decision…

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Section 363 Sales And Beyond: An M&A Lawyer’s Perspective On Purchasing Assets From Distressed Companies

Bob Eisenbach — Mon, 22 Jun 2009 03:40:10 +0000

With the economy suffering through the longest recession since the 1930s, it’s little wonder that much of the merger and acquisition ("M&A") activity these days has been focused on distressed companies. The Chrysler and General Motors cases may be the best-known examples, but Chapter 11 bankruptcy is frequently used by companies large and small to sell assets through Section 363 sales.

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