Article 9 Restructuring is an out-of-court resolution process which creates incentives for all stakeholders to avoid the judicial process. We like to call it a win-win-win.
Article 9 Restructuring is an out-of-court resolution process which creates incentives for all stakeholders to avoid the judicial process. Panelists will discuss Article 9 Restructuring vs. traditional Article 9 sale & the process in action, through a recent case study involving Namco Pool & Spa, which avoided a Chapter 11 filing & was restructured successfully out of court. We’ll visit an example with Lippes Mathias & Second Wind Consulting principals discussing why a bankruptcy filing posed serious challenges, & how the firms collaborated through the Article 9 Restructuring process.
Key points discussed:
- An Article 9 restructuring is a cooperative process that aligns the incentives of the senior secured lender, the current business owners, the incoming purchaser, and any new lender. This allows for a quicker, out-of-court resolution compared to bankruptcy.
- The process involves the debtor surrendering collateral to the senior secured lender, who then sells the assets to a new buyer in a private or public sale. This allows the business to continue operating as a going concern.
- Compared to bankruptcy, Article 9 restructuring can be faster, less expensive and allow for more customization to preserve value and key vendor relationships.
- The Namco Pools case study demonstrates how the Article 9 process can be applied in practice, even with challenges like negotiating lease terms with multiple landlords. The process’s flexibility allowed the stakeholders to work together to find a solution.
- Overall, the panel highlights Article 9 restructuring as a valuable tool for distressed middle-market and lower-middle-market businesses when the senior lender is undersecured and the stakeholders are willing to cooperate.
Panelists: Justin A. Barr, Carter Bank; Sally C. Barton, Second Wind Consultants; Jacen A. Dinoff, CTP, KCP Advisory Group; Adam Duso, Second Wind Consultants; Annette Jarvis, Greenberg Traurig, LLP; *John A. Mueller,*Lippes Mathias, LLP