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Successful Wind-Down and Exit Management

By Bruce A. Erickson and Joel H. Levitin

Professionals are often asked to assist in the wind-down and liquidation of a company by the company's legal counsel. The requesting attorney, who may have a history with the company, knows the company is in trouble and may even expect a bankruptcy filing will come relatively soon.

At this point the company's secured lender is unwilling to provide additional support, the company has been unable to attract alternative financing, and the equity sponsor will not continue to fund the company. The company's limited working capital often comes from stretching trade and other creditors to the breaking point. Word of the company's situation has spread to the point where vendors will supply product only on C.O.D. terms or demand a portion of old debt, further exacerbating the cash crunch. Payment of outstanding accounts receivable slows while customers investigate switching suppliers. Uninformed employees assume the worst, and many are paralyzed with fear of losing their jobs; those who can are fleeing. The ability to meet payroll is often in doubt.

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