Leveraging Chapter 11 for Middle Market Restructurings

This technical report discusses the use of Chapter 11 bankruptcy as a viable option for middle market companies facing financial distress. It outlines the common misconceptions regarding the costs associated with Chapter 11 filings and compares them to out-of-court alternatives such as Assignment for the Benefit of Creditors (ABC) and Article 9 Strict Foreclosure. The report details the risks involved in these alternatives, including potential litigation and asset valuation disputes. It further explains the benefits of Chapter 11, such as the ability to secure releases for stakeholders and the opportunity to sell assets free and clear of creditor claims. The report emphasizes the importance of having a clear plan and sufficient debtor-in-possession (DIP) financing to facilitate a cost-effective Chapter 11 process. Additionally, it presents case studies demonstrating successful outcomes from recent Chapter 11 cases, highlighting the strategies employed to manage liquidity and negotiate favorable terms during the restructuring process.