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In re EM Lodgings, LLC

In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.

Court Accords Equal Weight to Competing DCF-Based Hotel Valuations

In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.

Trustee’s Attack on Merger Projections Fails to Resonate With Court

Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.

Management projections take center stage in bankruptcy case

In a complex bankruptcy case involving players in the petrochemical industry, the court trained its eyes on the management projections underlying a merger that led to the formation of a company that went bankrupt only a year after the close of the transaction.

Solvency Determination Turns on Income Recognition Analysis

Court credits trustee expert’s analysis of debtor’s balance sheet, finding the expert showed debtor’s practice of immediate recognition of initial franchise fees as revenue violated GAAP and debtor was continuously insolvent; transfers are avoidable.

Misunderstanding of Facts Results in Overvaluation of Fuel Supply Rights

Debtor’s fuel supply rights had value either in form of an implied contract, customer relationship, or simply an income stream, court says; court does not assign specific value but finds appraiser overstated its value due to misunderstanding of key facts.

Solvency Determination Turns on Income Recognition Analysis

Court credits trustee expert’s analysis of debtor’s balance sheet, finding the expert showed debtor’s practice of immediate recognition of initial franchise fees as revenue violated GAAP and debtor was continuously insolvent; transfers are avoidable.

Redmond v. NCMIC Fin. Corp. (In re Brooke Corp.)

Court credits trustee expert’s analysis of debtor’s balance sheet, finding the expert showed debtor’s practice of immediate recognition of initial franchise fees as revenue violated GAAP and debtor was continuously insolvent; transfers are avoidable.

Advanced Bankruptcy Valuation

Get current on issues related to the valuation of businesses, securities, and intellectual property within a bankruptcy context in this advanced session with Robert Reilly. Learn the common reasons why valuation professionals are retained during a bankruptcy-related liquidation, restructuring, or reorganization and the applicable Bankruptcy Code sections and Bankruptcy Rules provisions that apply. Attend this session and understand the analytical issues that are specific to the valuation of businesses that are financially troubled (and operating ...

Trustee’s Attack on Merger Projections Fails to Resonate With Court

Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.

Weisfelner v. Blavatnik (In re Lyondell Chem. Co.)

Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.

Misunderstanding of Facts Results in Overvaluation of Fuel Supply Rights

Debtor’s fuel supply rights had value either in form of an implied contract, customer relationship, or simply an income stream, court says; court does not assign specific value but finds appraiser overstated its value due to misunderstanding of key facts.

r2 Advisors, LLC v. Equitable Oil Purchasing Co. (In re Red Eagle Oil, Inc.)

Debtor’s fuel supply rights had value either in form of an implied contract, customer relationship, or simply an income stream, court says; court does not assign specific value but finds appraiser overstated its value due to misunderstanding of key facts.

Flop film poses unique valuation challenge

A recent bankruptcy-related case in front of the California Court of Appeal raises important questions about how one quantifies the value of a dated piece of art, a film, for which there never was a market in the first place.

‘Dramatic’ Valuation Adjustment Justifies Equity Committee

In a rare nod to shareholder concerns, Bankruptcy Court approves formation of equity committee based on “dramatic adjustment in valuation” and inconsistent management positions as to financial health of debtors pre-Chapter 11 and post-petition filing.

Debtors’ Balance Sheet Not Reliable Indicator of Assets’ Market Value

Court says debtors “appear to be hopelessly insolvent” and rejects shareholders’ call for equity committee; debtors’ prepetition published financials are not “dependable evidence” of assets’ fair market value, even if investors relied on balance sheets.

Daubert Flexible as to Solvency Determination for Multiple Debtor Entities

Court finds Daubert centers on reliability, not persuasiveness, and can accommodate experts’ different approaches to determining solvency in case with multiple debtor entities; court rejects exclusion of expert opinion relying on GAAP-based financials.

Daubert tests reliability of testimony, not power of persuasion

The plaintiff, representing the debtor enterprises, sued executives of related family-run consumer lending and retail businesses that had filed for Chapter 11 bankruptcy over allegedly fraudulent transfers.

Bankruptcy Court’s Going-Concern Valuation Weathers Appeal

In Chapter 7 case, Bankruptcy Court finds trustee expert’s liquidation valuation fails to meet insolvency tests; court says expert’s substantial discounting of debtor’s assets is based on mistaken assumption and incompatible with going-concern valuation.

Bankruptcy Court’s Going-Concern Valuation Weathers Appeal

In Chapter 7 case, district court upholds Bankruptcy Court’s insolvency determination, which was a predicate to many of trustee’s claims; reviewing court says evidence supports use of going-concern valuation and rejection of liquidation discount.

Debtors’ Balance Sheet Not Reliable Indicator of Assets’ Market Value

Court says debtors “appear to be hopelessly insolvent” and rejects shareholders’ call for equity committee; debtors’ prepetition published financials are not “dependable evidence” of assets’ fair market value, even if investors relied on balance sheets.

In re Sunedison, Inc.

Court says debtors “appear to be hopelessly insolvent” and rejects shareholders’ call for equity committee; debtors’ prepetition published financials are not “dependable evidence” of assets’ fair market value, even if investors relied on balance sheets.

Expert report proves best defense against Daubert offense

In litigation, attacks on expert opinions are par for the course, but a sound expert report can ward off a Daubert challenge and clear the way to admission at trial, as a recent fraud case illustrates.

Why Divorce Valuation Does Not Accord With Chapter 7 Liquidation Analysis

Bankruptcy Court says differing standard of value in divorce and bankruptcy proceedings precludes use of divorce valuation of husband’s interest in dental practice; but valuation based on shareholder agreement accords with Chapter 7 liquidation analysis.

Why Bankruptcy Court declines to be bound by divorce valuation

Following the divorce, the husband filed for Chapter 13 bankruptcy and asked for confirmation of his plan. The issue was whether the plan could meet the liquidation test applicable under the Bankruptcy Code’s section 1325(a)(4). In essence, the test requires that creditors in a Chapter 13 bankruptcy receive present value payments that are at least equal to the amount the creditors would receive in a Chapter 7 case.

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