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10Questions: Managing Bankruptcy Costs By Streamlining Administration Processes « Back
July 2012
Page 2 of 2
FW: What are some advances that have taken place regarding securities?

Schrag: In today’s corporate restructuring arena, an increasing number of cases involve complex public securities issues. Fluctuating credit markets, complex capital structures and accelerated timeframes of today’s bankruptcies heighten the need for a well-planned public securities strategy to avoid mishaps in communicating with these important parties. In the current economic environment, there are several areas where debtors may encounter pitfalls in reaching out to public-securities holders. In particular, challenges may occur during rights offerings, plan treatment elections and when dealing with public-securities holders across international borders. In situations where bonds are cancelled and new equity is issued, there are issues to consider in working with the transfer agent and the trustees to ensure that any distributions to public-securities holders under Chapter 11 are handled effectively. Corporate restructuring professionals who fail to consider these issues run the risk of derailing the process, while those who take a proactive approach will benefit from a more efficient outcome.

FW: In what ways are industry professionals using social media on a day-to day basis?

Schrag: As businesses are more comfortable using social media for marketing and corporate communications, we are seeing bankruptcy professionals relying on social media as a source of information on a real-time basis, as well as another vehicle to communicate with their clients and keep the market appraised of developments in any given Chapter 11 matter and the legal field in general. For example, with our own Twitter account we are experiencing an increased level of engagement through substantive content. We use it as a platform to share case website information and encourage an open dialogue with creditors. There are also numerous legal blogs providing case summaries and opinions and attorneys are increasingly referring to blogs to gauge popular opinion regarding mainstream bankruptcy cases and opinions. LinkedIn is another popular professional networking community where attorneys are spending significant more time to connect with other professionals in the legal space and engage with industry specific groups for knowledge sharing, business development and new opportunities.

FW: How do you assist companies with preparing to file for Chapter 11 bankruptcy?

Schrag: Whether a company reorganises under Chapter 11 of the US Bankruptcy Code or pursues an ‘out-of-court’ restructuring, organised filing preparation can help debtors and their professionals streamline the restructuring, minimise time and costs associated with the process, and maximise the outcome. Typically, we work with the professionals involved early on to get ahead of the process. From understanding the first-day strategy, compiling the creditor matrix, gathering and organising data, to developing the pre or post-petition noticing strategy, our consultants collaborate with the debtor and professionals to ensure all first-day documentation requirements are met. In addition, developing a communication plan for employees and stakeholders is critical to the success of the filing. Writing a press release and internal messages, setting up an 800-number to field questions, along with launching a case-specific website, can help to foster an open dialogue while not detracting from the actual filing procedure.

FW: Managing the huge volume of information associated with a bankruptcy process can be a considerable burden. What streamlined solutions exist to ease this burden?

Schrag: The corporate restructuring process often involves massive volumes of case information. From off-the-shelf to proprietary solutions, bankruptcy professionals are more quickly adopting these technology systems today. Virtual data room (VDR) solutions were historically used as secure, web-based deal rooms in M&A transactions, but they are now frequently used to assist in organising a debtor’s financial records, contracts and other pertinent data relevant to Chapter 11 proceedings. With software such as our own KCC ClearView, documents can be electronically coded to help expedite contract review, streamline asset sales or facilitate legal proceedings in conjunction with a corporate restructuring. Interactive Voice Response systems (IVRs) can supplement traditional live-operator call centre specialists with recorded information about case developments, claim and voting deadlines and direct interested parties to case websites to obtain court documents. In addition, professionals are using bankruptcy administration platforms to search for claims, understand claims status and review distribution payments.

FW: Do you expect to see an increase in bankruptcy filings in the months and years ahead?

Schrag: Unfortunately, there is no crystal ball to predict the next wave of bankruptcy filings. Today, bankruptcy filings have decreased because distressed companies can finance debt more easily through the relatively open credit markets. The US economy, however, remains fragile and continues to recover from the recent economic crisis. In addition, Europe’s economic instability will, undoubtedly, influence the US economic market. Lastly, the upcoming US political season may shine a spotlight on the financial industry and put pressure on covenant-lite lending practices.

Benjamin P.D. Schrag is vice president of Corporate Restructuring at KCC. As VP of Business Development for KCC’s corporate restructuring services, Mr Schrag leads client engagement initiatives to solidify the firm’s market leadership position in claims and noticing services for Chapter 11 case administration. Previously, Mr Schrag served as Director of business development, managing key relationships with clients engaged in corporate restructuring cases while supporting the company’s growth initiatives. His experience includes the representation of debtors in Chapter 11 restructurings such as Stallion Oilfield Services, Majestic Star Casinos, Masonite Corporation, Wellman Inc. and Solutia, Inc. He can be contacted on +1 (917) 281 4826 or by email:
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