I’ve represented creditors in litigation for over thirty years, and I’ve been involved in numerous commercial workouts. When a lender is paid in full and the business survives, it’s a win-win. Too often, collateral is recovered at a loss, and the business winds down. I enjoy frequenting a local movie theatre that was one of those successes several years ago, when I negotiated a forbearance and refinancing on behalf of a large, national bank.
Early this year, I wrapped up another highly successful workout for a fantastic regional bank client. We applied just the right amount of pressure by being ready to initiate litigation in an instant if necessary. After all, we were well secured by equipment, inventory, and accounts receivable. However, we also cooperated with the borrower, its counsel, and its eventual buyer, in an effort to save the business, save jobs, and ultimately, to be paid in full.
Through a series of forbearance agreements and months-long negotiations, we navigated through potential refinancing by asset-based lenders, the possibility of partial refinancing by my client, a promised capital raise by the publicly-traded parent company guarantor, union threats to walk out and stop production, fears of bankruptcy, and finally, the successful sale of the company.
At closing, my client received every penny of its seven-figure principal, interest, and fees, including all attorneys’ fees. The company now has a successful parent/partner that will help it thrive, over 100 jobs were saved, and the guarantor avoided litigation that would have blown up the enterprise.
In other words, despite continuing economic uncertainty, there are notable successes. While it appears we’ve dodged the long-predicted recession, we read a lot in the press about businesses closing or reorganizing in bankruptcy. And the numbers have gone up.
Commercial chapter 11s were up 72 percent in 2023 over 2022. Subchapter V filings within those Chapter 11s were up 45 percent. The commercial filings were skewed by WeWork, which had over 500 related cases.
But the increase in total filings, while still significant, was only 18 percent. Interestingly, the total number of bankruptcies last year was still over 300,000 fewer filings than in 2019, before the pandemic.
Considering the end of pandemic-induced free money and forbearance policies, an increase in bankruptcies is not a surprise. Neither is an increase in commercial workouts. The right approach can make those workouts successful for all sides.
At Dalton & Tomich, we represent creditors in litigation, workouts, and bankruptcy proceedings. Contact us today to discuss recovery of what you are owed.
