Assignments for the Benefit of Creditors are an often overlooked procedure for liquidating a company. A good way to understand ABCs is to think of them as an out of Court Chapter 7 case. Creditors – both secured and unsecured – and debtors turn to ABCs when a company (or its assets) need to be sold so the proceeds can be paid over to creditors. An ABC is an alternative to liquidation by foreclosure, receiver’s sale, Section 363 sale in bankruptcy, and sale by the debtor itself.
Workout professionals should keep ABCs in mind when collecting a loan from a failed company with valuable assets such as trade names, intellectual property, inventory and equipment. Property run, an ABC can liquidate collateral at a reasonable cost, which sometimes can be fixed, and it can allow a busy workout professional to use the skilled services of an experienced assignee to get the job done in short order.
Recently, my partner Barry Freeman, and Mike Joncich of Credit Managers Association, gave a program on ABCs before the Financial Institutions Committee (FIC) of the Business Law Section of the State Bar of California. (Full disclosure: I am Vice Chair of the FIC.) Barry has represented secured and unsecured creditors as well as assignees. Mike and CMA often serve as assignee, and are charged with the job of liquidating assets in an orderly, commercially reasonable manner so that creditors can recover from a failed company.
Barry and Mike put together a terrific PowerPoint presentation for their program, and they were kind enough to share it with us.
The JMBM Special Assets Team has handled many ABCs over the years. In addition to Barry and me, our new partner, Ben Young, is an ABC expert, frequently representing experienced assignees. Give us a call the next time you are faced with a failing borrower who has valuable assets but no game plan to monetize those assets.
This is Dick Rogan, bank lawyer and author of www.SpecialAssetsLawyer.com, signing off for now. Join us again soon to check out what’s new in the World of Workouts.
Year after year, day after day, workout professionals in the know rely on JMBM’s Special Assets Team™ to handle problem commercial and real estate loans. Whatever problem loans you have, chances are, we’ve seen it. Give us a call.
Our Perspective. JMBM represents commercial banks, special servicers, private lenders, asset-based lenders, hard money lenders and factors. We help lender clients throughout the United States craft business and legal solutions to their commercial and real estate troubled loans. For more information, please contact Dick Rogan at RRogan@JMBM.com, or (415) 398-8080.
Richard A. Rogan is Chair of the JMBM Special Assets Team™. He also serves as the co-managing partner of JMBM’s San Francisco office and co-chair of its Bankruptcy Practice Group.
JMBM’s Special Assets Team™ has represented hundreds of lenders in California and throughout the United States. We regularly appear in bankruptcy courts, district courts and superior courts. We are proud to serve as trusted counsel and advisors who look for a business solution and try to help lenders find the best possible resolution for each troubled loan. Whether a loan is being newly documented, restructured or litigated, JMBM’s Special Assets Team™ has the skill, know-how and experience to solve your problem in a practical no-nonsense way.
NOTE TO CONSUMERS: As a matter of Firm policy, JMBM does not represent individual consumers who have disputes with their lenders. Many lenders have specialized consumer workout professionals who have the time to help consumer borrowers. There are many fine attorneys who specialize in representing consumers. Individuals with consumer lending problems should contact a lawyer or law firm who specializes in consumer insolvency and bankruptcy in their local area. When in doubt, we suggest you contact your local bar association’s Lawyer Referral Service. [For example, see Bar Association of SF or LA County Bar Association Lawyer Referral Services]
JMBM does not provide legal advice to consumers, and cannot respond to consumer inquiries.