Valuation

This panel will discuss the rationale and practical consequences of the nuanced approach to the often difficult concept of valuation in Chapter 11 taken by the ABI Chapter 11 Commission’s recommendations.

Whether it is warrants for junior creditors or equity incentive options for a new management team, derivatives have long played a role in negotiating restructuring outcomes. However, as capital structures have become more complex and stakeholders in distressed companies more sophisticated, derivatives and advanced analytic techniques are playing a larger role in the world of bankrupt and distressed companies. This panel explores theoretical as well as practical issues associated with derivatives and probabilistic methods in a distressed environment, and draws from real-world examples of their increased use in the world of troubled, underperforming and revitalized companies.

This session, which is based on real case examples, addresses issues such as capital structure (debtor’s actual vs. industry average), cost of debt (debtor’s actual vs. industry average), and modifications to the CAPM (e.g., size premium).

Gain practical insight for owners, investors, lawyers and financial advisors to properly structure on the front end of a transaction in order to mitigate the risk of a subsequent fraudulent transfer challenge.

This panel will use a case study approach in discussing the restructuring alternatives of a company with multiple debt tranches with mock negotiations between and among a distressed company, its 1st lien lenders, 2nd lien lenders and equity sponsor. The presentation will focus on valuation, the rights, remedies and restrictions of each of the lender groups and the equity sponsor both outside of a bankruptcy and following the commencement of a bankruptcy proceeding, and the impact of debt trading on such negotiations.

This session will take a look at different valuation techniques, including asset approaches, market approaches and income approaches. Concepts such as time value of money, discounted cash flows, determining the discount rate and cost of capital, and terminal value assumptions will be illustrated. Comparable companies and precedent transactions to establish the relative enterprise and equity value of firms will also be examined and discussed.

This session will cover basic accounting concepts of revenue and expense recognition and will discuss financial statement analysis, financial ratios, and the calculation and forecasting of firm free cash flow in the context of distressed companies.

There is divisiveness on several fronts in the valuation community. Splits exist among circuits and other venues. This panel will identify key controversial valuation issues that prevail among practitioners and the courts, and offer insights to understand the focal points of each controversy.

The Momentive decision is one of the most momentous decisions concerning secured creditor cramdown in recent years. This panel will review the Supreme Court’s Till decision and post-Till developments and explore the Momentive decision, focusing on the decision’s impact on and importance for future restructurings.