Distressed Businesses

If the signs indicate that dissolution of your business is a possibility, you should consider the advantages a General Assignment for the Benefit of Creditors.

An Assignment provides an effective alternative to Chapter 7 bankruptcy. 

  • Faster resolution

  • Normally provides greater recoveries for creditors

  • Does not require creditor approval

  • Does not require court approval

  • More flexible disposition of assets

The Hamer Group is known in the financial and legal communities for its ability to maximize recoveries, either by liquidation or selling the business assets as a going concern through a General Assignment.

Case Study
Manufacturing Company

The company designed and manufactured monitoring equipment for agricultural applications. In spite of revenue growth the company was losing money.  It had exceeded its lines of credit and was close to default on bank loans.  In addition the owners had infused considerable personal funds, including a second mortgage on their home and other personal lines of credit.  The longer they operated, the worse the problem grew.

Our analysis revealed that internal problems of management, coordination, inventory control, manufacturing process, planning and overall discipline, coupled with overly ambitious and ill considered moves to grow the technology resulted in a decline in margin over a period of five years.

Monthly shipments were 20% under break even and critical suppliers had placed the company on credit hold.  Cost of goods was at 75% and creeping up.  The company had considered these options:

Turn-around management.  Several consultants had been hired, none of them had succeeded.

 Sell the company as it was.  No outside buyer could be found who would also assume the debt.  A major competitor was in the wings waiting for the company to file bankruptcy so its inventory and equipment could be picked up cheaply.

Find new investors.  No one was interested.

On our recommendation after consulting with the company counsel  and  CPA,  the owner decided to assign the company’s assets in a General Assignment for the Benefit of Creditors..   

We recommended that in order to maximize the recovery of assets and provide the greatest distribution for creditors, it was crucial that the company be kept in operation on an interim basis.  

This would allow us to

  1. Find the best buyer
  2. Turn raw materials inventory into finished goods
  3. Turn WIP into shipments
  4. Maintain the company’s position in its market
  5. Meet contractual obligations to customers
  6. Sell the business as a going concern

Upon acceptance of the assignment we put our own interim manager in place to run the company and operate it on a positive cash flow basis.  We then vigorously marketed the company.

Within two weeks we had found two interested buyers and conducted a closed bid sale. 

The result was that all of the secured creditors were paid in full and unsecured creditors received a recovery of over 20%.




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