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10Questions: Managing Bankruptcy Costs By Streamlining Administration Processes « Back
July 2012
 
FW speaks with Benjamin P.D. Schrag, vice president of Corporate Restructuring at KCC, about managing bankruptcy costs by streamlining administration processes.



FW: To what extent have the complexities and cost implications of the bankruptcy process increased in recent years? What challenges are you seeing in the bankruptcy market today?

Schrag: The traditional ‘free fall’ Chapter 11 bankruptcy – that by definition does not commence with an agreement among creditors and other key constituencies¬ – can foster contentious and adversarial proceedings, and add to the time and administration costs of a bankruptcy case. Several recent Chapter 11 cases, however, have required only a financial restructuring, as opposed to an overall in-depth operational fix, so the recent trend has been an increased use of pre-packaged and pre-negotiated bankruptcies. In pre-packaged or pre-negotiated Chapter 11 cases, the emphasis is placed on negotiations aimed to reach a consensual agreement prior to the Chapter 11 filing, which limits a company’s time in Chapter 11 and, in turn, limits the costs of case administration.

FW: Are streamlined administration processes available to overcome these challenges?

Schrag: Yes, streamlined processes are available. From the onset of a case, firms should offer a streamlined claims administration process and employ advanced technology that efficiently gathers and organises relevant information and data to produce the information required for the company’s ‘first day’ filings, as well as the creditor matrix, schedules of assets and liabilities, and statement of financial affairs. If a case involves public securities, we set noticing strategies into place to facilitate communications and expedite voting by securities holders. Our other solutions includes the use of electronic proof of claims (ePOC), which allows creditors to file their claims and required paperwork electronically, and reduces the time and cost of administration. Advancements in technology, allow professionals to access case data and other relevant case documents from any location which keeps them in direct communication with case proceedings when away from the office.

FW: What skills are required to anticipate and streamline the bankruptcy process?

Schrag: It is essential to be prepared from the outset of a case and have an organised filing, even if that requires quick preparation. Debtors should work with the debtors’ professionals as early on as possible and have the skills to ensure that an efficient information gathering process is implemented immediately. This assists debtors and their professionals to streamline the restructuring by making sure relevant information is accurate and the assets and liabilities are documented. Such a process is also essential to gather the information necessary not only for ‘first day’ papers, but also the creditor matrix, schedules of assets and liabilities and statement of financial affairs, to insure that the company is complying with the required noticing procedures. In addition, maintaining an open line of communication with employees and stakeholders is central to streamlining the administration process. From the outset, it is essential for the company to develop a communication plan which can foster an open dialogue and field questions.



FW: Could you explain some of the technology trends now appearing in the corporate restructuring space? What new technologies are corporate restructuring professionals adopting?

Schrag: Throughout this past decade, the industry has seen technology become an integral part of the corporate restructuring process. Professionals have not only become more familiar with technology solutions but rely on these resources to meet the needs of their clients throughout the duration of a case. For example, our technology platform provides professionals with access to thousands of historical court documents to conduct precedent searches for similar bankruptcy cases when preparing for a case. To reduce administration time, ePOC solutions offer creditors the ability to respond to notices and file their claims electronically. A more recent development involves mobile accessibility to case information, bankruptcy law and industry tools. A quick search on smart phone app stores results in many new applications for bankruptcy professionals. Among the many options available, our iPad app, KCC OnTheGo, allows corporate restructuring professionals to access case data, industry news, and bankruptcy-related legal resources.

FW: Are you seeing any particular trends in the international market? Have there been any movements in insolvency laws internationally to more closely align with US bankruptcy laws?

Schrag: In today’s burgeoning economy, most large companies have a global reach. There is no doubt that the current economic crisis in Europe is being closely followed concerns of how Europe’s instability will impact the world economy. With respect to international insolvency laws, the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 introduced Chapter 15 to the Bankruptcy Code in response to the global ripple effect caused by international bankruptcies. Chapter 15 follows a model law that was proposed by the United Nations Commission on International Trade Law (UNCITRAL), with the goal of promoting global uniformity and since its introduction, the model law has been adopted in over 15 countries.
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