Published on June 9, 2016
After multiple years of mismanagement and poor A/R collections, a cabinet manufacturer and carpentry contractor was illiquid and headed toward a Chapter 7 liquidation. Its attorney recommended hiring Stapleton Group to assess alternatives.
In an Assignment for the Benefit of Creditors (ABC), we achieved a recovery 3-4x greater than could have been accomplished in a Chapter 7, saved jobs and ensured customers’ projects were completed by:
- Negotiating a payment plan with the largest creditor, which had liens on A/R, to keep the business operating until it was sold;
- Identifying prospective buyers who would complete the debtor’s contractual work-in-process so pre-existing A/R could be collected for the benefit of pre-existing creditors; and
Applying the sale proceeds to pay priority liens, such as payroll and past-due taxes.
Obstacles and Stapleton’s Solutions
Mechanics liens on certain projects limited A/R collections, impeding working capital.
- We negotiated with the vendor holding the liens to attain a favorable payment plan, enabling the ABC to proceed.
The company faced IRS liens for past-due payroll taxes, overdue accounts payable, vendor disputes and pending eviction for overdue rent.
- We negotiated a favorable long-term payment plan with the IRS.
- We analyzed owed statutory wages pursuant to California law.
- We negotiated with the landlord to avoid eviction, ultimately achieving a new lease between landlord and buyer and the forgiveness of some debt.
- We sold assets (equipment, raw materials and certain WIP contracts), applying the proceeds to pay priority liens.
The company lacked working capital to complete customer contracts to generate revenue.
- We negotiated the sale of assets to a buyer willing to fulfill pre-existing contracts.
- We aggressively collected outstanding A/R and A/R generated by the completed contracts for the benefit of creditors.
Moral of the Story
When a business in financial distress lacks a clear path to recovery, an ABC with Stapleton Group as assignee may be a better choice than Chapter 7 bankruptcy for the business’s creditors and shareholders. Call us to learn more about our fiduciary services at (213) 235-0600.
About Stapleton Group
Businesses encounter financial challenges for many reasons. Stapleton Group determines the cause of the problems, implements strategic plans and achieves resolution as quickly as possible. Along the way, our experienced team overcomes impasses, remedies operational issues and controls the collateral. Creditors recover as much capital as possible. Shareholders overcome disruptive disputes. Problem solved.
Contact us at email@example.com or (213) 235-0600 to learn more.