A Practical Guide to Bankruptcy Valuation, Second Edition

June 2017 Hardcover (680 pages)

Dr. Israel Shaked, Robert F. Reilly

American Bankruptcy Institute

Revised and expanded, A Practical Guide to Bankruptcy Valuation, Second Edition helps both practitioners and students navigate the complex task of valuing a bankrupt or other financially distressed business, and provides practical guidance on the selection and application of valuation approaches, methods and procedures. This book contains a wealth of updated information on how solvency and capital-adequacy analyses, creditor-protection issues, debtor-in-possession financing, fraudulent conveyance and preference claims, restructuring of debtor securities, sale of bankruptcy estate assets, plans of reorganization, staffing costs, bankruptcy taxation issues and fresh-start accounting issues, among others, are factored into properly valuing a bankrupt company.

Interspersed with helpful charts and hypothetical examples (some based on real cases), this manual describes the generally accepted approaches for valuing the assets and securities of a financially troubled business. It also provides professional guidance to troubled-company managers, debt-holders and other creditors, equity-holders and investors, bankruptcy counsel, juridical finders of fact and other parties to a bankruptcy proceeding, including those called upon to be expert witnesses in bankruptcy cases. Based on the authors’ combined 75 years of experience in the valuation field, A Practical Guide to Bankruptcy Valuation, Second Edition lays a solid foundation for those seeking a better understanding of valuation in the bankruptcy context.

Table of Contents:


Chapter 1: Business and Securities Valuation Issues

A. Valuation of Closely Held Debtor Company Stock
B. Guideline Company Valuation Methodology: Details Often Overlooked
C. Analysis of Company-Specific Risk in the Bankruptcy Business Valuation
D. Understanding Fair Market Value in Bankruptcy
E. Ten Elements of the Bankruptcy Business Valuation Assignment
F. Playing the Market (Approach): Going Beyond the DCF Valuation Method
G. Valuation of Health Care or Pharmaceutical Companies for Bankruptcy Purposes
H. Valuation Adjustments in the Bankruptcy Business Valuation
I. Liquidity and Control: Valuation Discounts and Premiums and the Debtor Company
J. Quantifying the Valuation Discount for Lack of Voting Rights and Premium for Voting Rights
K. The Use of M&A Transactions in Bankruptcy Valuations: Reasons Why Acquirers Overpay
L. Solvency Analysis: A Primer on Applying the Discounted Cash Flow Method
M. Valuing the Financially Distressed Company
N. Case Studies in Corporate Bankruptcy Valuation

Chapter 2: Tax and Accounting Valuation Issues

A. Income Tax Discharge Considerations in Chapter 7
B. Accounting Rules for Troubled-Debt Restructurings
C. Earnings: Quality vs. Quantity
D. An Offer in Compromise May Offer Tax Relief to Financially Troubled Taxpayers
E. Income Tax Implications of Industrial and Commercial Property Mortgage Debt Restructuring
F. Tax Planning Opportunities Related to the COD Income Deferral Election
G. Worthless Security Deduction for Intercompany Debt to a Financially Troubled Subsidiary
H. Income Tax Issues Related to S Corporation Debt Restructuring

Chapter 3: Financial Advisory Services, External Conditionsand Valuation Issues

A. What Drives Companies from Solvency to Distress? Seven Common Causal Factors
B. The Financial Crisis and a Framework for Analyzing the Financially Distressed Company
C. Fraudulent Transfers and the Balance Sheet Test
D. The Independent Investor Test in Shareholder/Executive Compensation Analyses
E. Fiduciary Responsibility in the Case of Defined Contribution Plans
F. The Paradox of Corporate Bankruptcy in a Robust Economy
G. Fraudulent Transfer Considerations Related to the Closely Held Practice Asset Protection Plan
H. Debtor Beware: Double-Edged Sword of Financial Leverage
I. Procedural Checklist for the Review of Solvency Opinions
J. Capturing the Complexity: The Importance of Financial Analysis in an Asbestos Bankruptcy Filing

Chapter 4: Intangible Asset and Intellectual Property Valuation Issues

A. Defining the Intangible Asset Valuation
B. The Identification of Intangible Assets for Bankruptcy Purposes
C. Valuation of Debtor Company Intellectual Property in a Distressed Economy
D. The Valuation of Intangible Assets for Bankruptcy Purposes
E. Debtor Company Valuation: How Good Is Goodwill?
F. A Guide to Valuation of the Assembled Workforce Intangible Asset
G. Intellectual Property Remaining Useful Life Analysis for Bankruptcy Valuations

Chapter 5: Transactions and Structuring Valuation Issues

A. Like-Kind Exchange Safe Harbor Provisions Due to Bankruptcy or Receivership
B. Structuring the 363 Sale of the Construction Company in Bankruptcy
C. Structuring the Troubled Company Sale Transaction
D. Partnership Debt Restructuring or Renegotiation: Income Tax Planning Considerations

Chapter 6: Valuation Reporting Issues

A. IP Valuation Reports and Valuation Analysts
B. Valuation Analyst Guidelines Related to Bankruptcy Expert Reports and Testimony
C. Bias in Analyst Recommendations: The Curious Case of Bankrupt Companies
D. Valuation Analyst Ethics Considerations in Bankruptcy Business Valuations
E. Managing Your Expert for a Successful Outcome: The 10 Commandments
F. Attributes of an Effective Intangible Asset Valuation Report

Chapter 7: Real and Personal Property Valuation Issues

A. Valuing a Real Estate Undivided Interest
B. Real Estate Appraisal Report Guidelines
C. Personal Property Appraisal Report Guidelines

Chapter 8: The Bankruptcy Process and Valuation Issues

A. Bankruptcy Valuation Hearings: As Highly Contested as Ever
B. To Be or Not to Be Confirmed: A Debtor's Post-Reorganization Viability
C. Had the Information Been Known: Lessons from the Enron Insolvency
D. The Mirant Valuation Saga: Epic Battle of Experts
E. Summary of Bankruptcy Valuation Issues