Plan Issues in Chapter 11
In Bankruptcy and Financial Restructuring, plan issues in Chapter 11 include:
- Fresh Start Accounting: FASB ASC 852, Reorganizations (formerly AICPA Statement of Position 90-7) requires that the balance sheet of a company emerging from Chapter 11 bankruptcy be restated to fair value. The entity’s asset value allocation must be in conformity with the procedures specified by ASC Topic 805. Cogent Valuation is an industry leader in financial reporting valuations based on the rules and guidance established in ASC Topic 805.
- Unsecured Creditor/Equity Holder Cram Down: The “Fair and Equitable” test for unsecured claims and equity interests requires that dissenting class members either receive property equal to the value of their claims or that no senior claims receive more than full value and no junior claims receive anything. Cogent Valuation can provide sophisticated security design assistance and the enterprise valuation analyses required to support the value of debt and/or equity securities to be provided to creditors.
- Best Interests Test: A liquidation analysis is required to demonstrate that any dissenting creditor or equity holder is receiving no less consideration under the plan than would be received under a Chapter 7 liquidation and distribution according to the “absolute priority rule.” This may require assistance from a valuation expert.