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The Bankruptcy StrategistFeaturesBankruptcyLitigation

ABCs As an Alternative to Bankruptcy for Implementing Distressed Transactions

By David S. Kupetz
March 01, 2021

Companies suffering financial distress frequently reach a crossroads where they need to either implement some type of transaction or will be forced to liquidate. Among the transaction vehicles that may be considered include out-of-court restructuring, an assignment for the benefit of creditors (ABC), foreclosure, Chapter 11 bankruptcy reorganization, or Chapter 7 bankruptcy liquidation. In developing a plan for moving forward, management should evaluate and determine, with appropriate input from outside experts, feasible alternatives.

Considerations include whether the business needs a balance sheet restructuring (deleveraging debt), an operational reorganization (eliminating certain locations and/or reducing or terminating parts of the business), and/or the use of a sale or merger process to clean the slate. Even if the business is no longer viable standing on its own, is it still attractive (at least in part) to a potential acquirer or joint venture partner?

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