Insufficient liquidity shrinks the range of options for a financially distressed business. The metaphor of a melting ice cube is often used to illustrate the situation. When the cash runs out and the company is unable to pay its employees or vendors, the ice cube has melted. The business has failed, and recoverable value has collapsed.
Editors’ Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to email@example.com and we will try to answer it. QUESTION: What is the first integral decision a potential purchaser of a distressed business must make? ANSWER: Assuming that the seller has not already […]
Drafting can easily go awry. When collateral descriptions are drafted errantly in security agreements and financing statements, secured creditors may not get what they bargained for and expensive disputes can bloom. A valid security agreement executed by the owner of the collateral and the secured party creates a security interest. Such a security agreement grants […]
In a previous article, we explained how the unsecured creditors committee in the bankruptcy case of Old GM is suing Old GM’s lender – JPM (as agent for a syndicate of lenders) – to recover $1.5 billion that had been paid to JPM during the bankruptcy case. Below we trace the technical legal framework for […]
Editors’ Note: This is the first in an irregular series in which we answer readers’ questions. If you have a question, submit it to firstname.lastname@example.org and we will try to answer it. QUESTION: Jack B. emailed, asking, “Please explain what an Article 9 sale is. My lawyer said that if I give a security interest to a […]