Jim Jennings, CPA works with closely-held companies, individuals, banks, and other affiliates providing tax, and restructuring and litigation support services since 1997.

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Reorganization Case Study #2

The Company (or "Debtor"), a $130 million manufacturer of consumer products, was under criminal investigation by the U.S. Department of Justice. The Company was alleged to have overstated assets and net income in excess of $30 million over a three-year period. In response to these allegations, the Company's lender froze the Company's main operating account and access to additional credit.

At the same time, the lender demanded, under a proposed forbearance agreement (granting, among other things, the ability to continue to operate), that the Company's sole shareholder (an elderly passive investor) guarantee past and future indebtedness. This was resisted by the shareholder. Consequently, Chapter 11 Bankruptcy filing was necessary.

Restructuring
In conjunction with Finley, Colmer and Company, Jim Jennings was hired coincident with the Bankruptcy filing. Finley Colmer was immediately charged with assessing all financial and operational aspects of the Company; obtaining DIP financing; overseeing production in the Company's sixteen manufacturing plants; and recommending a reorganization, or restructuring, plan. Jim Jennings was hired to assist full time in the reorganization efforts.

Liquidation
The Company's lender (also the largest general unsecured creditor), was owed approximately $49 million.The Committee of General Unsecured Creditors, in conjunction with the Debtor, determined that it was in their best interests to market and sell certain divisions of the Company on a going concern basis, and to orderly liquidate others. A summary of the Company, by major asset category and its ultimate disposition is as follows ($ = millions):

Asset Annual Revenues Number of Employees Disposition Sale or Liquidation Date(s) Approx. Proceeds
Cordage Division $80 450 Sold as going concern 10/2003 $16
Home Products Division $27 100 Liquidated in the normal course 13 month period $3
Water Sports Division $15 30 Liquidated in the normal course 8 month period $1
Hunting Division $8 20 Sold as going concern 2/2004 $8
Other assets: AR, Inventory, Equipment, Real Estate NA NA Realized or sold in the normal course of business 20 month period $40
TOTAL $130 600     $68

Milestones
Here are the highlights of milestones achieved during the proceeding.

Operating phase
13 month period:

Wind-down phase