Long Term Liquidation Results in 100% Recovery for the Senior Secured Bank Group

Binder and Binder

Hauppauge, New York

Challenge

Disability claim contingent litigation. $75 million in revenues. Debt of $23 million. Private equity sponsor-owned.


  • $6 million plus loss for 2 years in a row
  • Company filed for Chapter 11. Liquidation of Company’s assets occurred as part of the confirmed Plan of Reorganization
  • Company was in the business of being an advocate for individuals with disability claims with the Social Security Administration. The Company was bought by a private equity sponsor who put Company on a growth path which led to significant monthly losses, and an inability to generate sufficient working capital to service its Senior Secured Bank debt and its unsecured trade obligations. Following very difficult negotiations to resolve the situation, the Company made the decision to file a Chapter 11 bankruptcy proceeding to restructure Company. The goal was to restructure and reorganize the business and put it into a position to service its Senior Secured Debt and pay its creditors.
  • MorrisAnderson served as Financial Advisor to the Senior Secured Lenders leading to the filing of the Chapter 11, during the pendency of the Bankruptcy, and during the post-confirmation wind-down.
  • Analyzed the Company’s operations and the Bank Group’s ability to recover its debt.
  • Advised the Bank Group and its attorneys on the Bank Group’s financial options and potential results.
  • Interfaced with Company’s financial advisors to develop a Plan of Reorganization.

 

Solution

  • Following extremely difficult negotiations during the Chapter 11, a Plan of Reorganization was agreed to that called for Company to conduct an orderly liquidation of its assets outside of bankruptcy but with the bankruptcy court retaining jurisdiction over the case. It was estimated that the liquidation would take over 4 years to complete, as claims resolution takes years, and that the Senior Secured Bank Group would have a deficiency of $5 million to $7 million on its debt at the end. During this 4-year period of time, Company would service its over 40,000 disability cases, collect the resulting receivables, and not take on any new cases.
  • Worked with Company’s financial advisors during the wind down and advised the Senior Secured Lenders on issues such as budgets, analysis of asset sales, and the orderly wind-down of locations and personnel. A key issue was monitoring collections and costs to determine when costs would exceed collections and determining timing of sale of the remaining cases and accounts receivable to optimize the Senior Secured Bank Groups results.

Results

  • The Senior Secured Bank Group recovered 100% of its $23 million debt, plus interest.  The wind down was completed in under 3 years compared to the original estimate of 4 years.

Howard R. Korenthal

Howard R. Korenthal is a Principal and Chief Operating Officer at MorrisAnderson. He has over 30 years of experience working with financially distressed and underperforming companies, serving in senior management, interim management and consulting roles. Howard began his career with the Big Eight accounting firm of Coopers & Lybrand in Chicago where, as an audit… Read More