2015 VALCON

This session will cover revenue and expense recognition, financial statement analysis, financial ratios, and the calculation and forecasting of a firm’s free cash flow.

The federal code (and similarly state law) define "insolvent" as a "financial condition such that the sum of [the] entity's debts is greater than all of [the] entity's property, at a fair valuation..." 11 U.S.C. § 101(32)(A). Fair valuation is not defined in the bankruptcy code. How does fair valuation for solvency differ from fair market value which is used for valuation for income tax purposes? Or fair value which is used in shareholder oppression matters? What are the implications of using trading prices for the assets versus assuming continuity of operating within the existing legal entity? What are the differences it could create in measuring the cost of capital? Or contingent liabilities?

A judge and law professor discuss important areas that raise ethical issues, including the selection, usefulness and credibility of witnesses such as valuation experts; the ethics of advocacy and the role of zealousness; and stories about the surprising mistakes that people make.

An overview of the chapter 9 process, why municipalities do or do not file for chapter 9 protection, and the financial liabilities municipalities face, including bond debt, budget shortfalls, unfunded pension liabilities and costly union contracts. The discussion includes methods for restructuring bond debt under a plan of adjustment, issues related to general obligation bonds and special revenue bonds, how such claims are treated under Chapter 9, and related plan confirmation and valuation issues.

Valuation can be a squishy thing. This panel examines how valuation analyses and disputes can be shaped and impacted based on the shifting positions and perspectives of directors and their advisors. Minority investors may push back on management's projections; special and independent committees may change board dynamics and influence views regarding valuation inputs; interested parties without a direct line to the board may attempt to influence valuation through litigation or posturing. These and other scenarios can greatly impact how directors view and utilize the valuation process. Such scenarios can also have a significant impact on professionals advising regarding valuation. To whom does the professional owe fiduciary duties? How should the shifting board landscape impact the professional's advice? Must the professional seek direction from parties outside the board?

A bankruptcy reorganization or out-of-court restructuring can significantly impact tax attributes such as NOLS and basis. The existence of and ability to use such attributes after a reorganization or restructuring often affects value. Two common issues must be considered with regard to a transaction’s impact on such items: the reduction of tax attributes and limitations on the ability to use tax attributes. The topics addressing absorption of tax attributes include discharge of indebtedness income, attribute reduction, stock-for-debt exchanges, debt modifications and elections. The loss-limitation overview includes a look at § 382, special bankruptcy § 382 rules and trading restrictions.

The core of restructuring in the United States is the value of the entity at various points in time. The valuation of the post-restructured business plan is one of the most contentious yet essential components of restructuring. In the U.S. valuation takes on a strategic and tactical significance. It impacts the form of restructure, sale v. reorganization, and going concern v. liquidation. This panel contrasts approaches used by other jurisdictions around the world.

Albert Gallatin was the longest-serving U.S. Secretary of the Treasury (1801-1814) and came into office as a professed anti-Federalist, ardent proponent of fiscal responsibility, and vocal opponent of Alexander Hamilton’s financial policies. However, Gallatin failed to accomplish the Jeffersonian objectives of shrinking the national debt and eliminating taxes, as he was forced to finance a war with Great Britain and the purchase of the Louisiana territory. Gallatin also supported the First Bank of the United States and proposed federally financed infrastructure projects. Consolidation, it seems, is complicated. A discussion of the early history of sovereign debt in the U.S., in particular the roll-up of the obligations of the colonies into the newly constituted federal government, the role of the First Bank of the United States, and the political challenges of managing the debt. Sovereign debt sustainability and valuation in the modern era, focusing on governments’ ability and willingness to pay, the role of central banks, and a potential resolution to the euro area crisis, will be addressed.

An in-depth discussion from the front lines of distressed investing, with multiple perspectives on how deals and decisions are made. The issues and outcomes for real companies are addressed from the perspectives of judge, financial advisor, debtor and distressed investor.