Assignments for the Benefit of Creditors are an often overlooked procedure for liquidating a company. A good way to understand ABCs is to think of them as an out of Court Chapter 7 case. Creditors - both secured and unsecured - and debtors turn to ABCs when a company (or its assets) need to be sold so the proceeds can be paid over to creditors. An ABC is an alternative to liquidation by foreclosure, receiver's sale, Section 363 sale in bankruptcy, and sale by the debtor itself.
In these times of declining property values, lenders are often faced with the prospect of taking back property that will prove to be difficult to manage as ORE. One time-honored means of administering these properties is to move for the appointment of a receiver and ask the Court to authorize the receiver to sell the property and disburse the proceeds in the appropriate priority.
Receiver's sales are useful in any number of circumstances. One of the best examples was in the liquidation of a failed farm implement dealership. The bank held a deed of trust on the real property, but property was chock full of equipment, tools, old engine blocks and decades of what looked a lot like junk. The bank received very high bids from salvage companies to haul it all away. Instead, the receiver held an auction and sold off all of the personal property. Result: instead of paying $100 to haul off an old engine block, a buyer at the auction paid $100 for the privilege of hauling it off! When the dust settled at the end of the auction, the yard was reasonably clean, most of the personal property had been removed by auction buyers, there was sufficient cash available to cover the cost of the auction and the receivership, as well as some left over for other expenses.
Meanwhile, the receiver had listed the property for sale. Once the property was cleaned up, buyers appeared and the property was soon liquidated for enough to repay the secured lender with some left over.
We've also used receiver's sales to sell property where there were documentation issues, such as where one lender held a deed of trust on the real property and another held a personal property security interest in the essential personal property. (Yes, a real lesson in underwriting!!) The receiver, as the neutral representative of the Court, was able to sort out which lender was entitled to what sums and get the property sold as a package to a buyer.
Now comes a decision that threatens to end receiver's sales. My partner, Joe Demko, who has handled countless receivership matters over the years, files this comment on a very troubling decision.
California Receivers Forum Program Set for March 18 in San Francisco; Victor Shum Celebrates 10th Anniversary With JMBM
We sold out the room for Receivership 101 last month, which my friend, Bruce Cornelius and I, had the honor of presenting for the Bay Area Chapter of the California Receivers Forum. Bruce and I serve on the Board of Directors for the Chapter.
Receivership 101 is a one-hour (if we talk fast) program that covers the basics of receiverships. It is a survey of the subject and after being refined for many years, it has become a good resource to learn about the basics of receiverships. You can find a slightly condensed version of the program materials right here on SpecialAssetsLawyer.com by clicking on the Receiverships tab.
The Forum is continuing its educational programs this month with an exciting program called "Receivership 201 - Receivership Issues for 2010 and Beyond". This program, to be presented by my fellow board members, Susan Uecker and Dennis Miller, will cover a handful of topics that are currently hot in the world of receiverships, such as condo conversions, note sales, housing developments and the important question as to whether a lender can get a better recovery by having the receiver sell the asset than by foreclosing.
I've attached a copy of the flyer and I urge everyone to attend, even though I won't be able to make it myself. I'm already set to celebrate an achievement by my corporate partner, Victor Shum: his tenth anniversary with JMBM! Victor is a savvy mergers and acquisitions lawyer who has many terrific accomplishments to his credit. I often rely on Victor to guide us through the ever-thickening maze of business organizations. He has a knack for the kind of practical thinking that solves knotty problems. We here at JMBM make a point of celebrating the longevity of our lawyers and our staff, and I am looking forward to taking time to thank Victor for all he brings to our Firm.
One of our most-viewed pages on SpecialAssetsLawyer.com is the Receivership 101 slideshow presentation. I've given this program several times, often with my long-time close friend and colleague, Bruce Cornelius. Bruce and I serve together on the Board of Directors of the Bay Area Chapter of the California Receivers Forum, and given the sharp rise in the number of receiverships, the Forum has once again decided to present Receivership 101 live and in person.
This is a great program for those workout professionals who know how to use receivers and would like to stay current, as well as for those who are new to workouts and would like to learn the basics. Bruce and I have lots of amusing anecdotes and practical tips to share along the way.
Bruce and I will be giving the program on February 10, 2010, and all of you are cordially invited to join us.
To download a copy of the registration form below, click here.
Special Assets Law: How do lenders, manufacturers and investors preserve value, minimize loss and repurpose shuttered motor vehicle dealerships?
Thousands of motor vehicles dealerships will fail before the restructuring of the auto industry is over. Clients of the JMBM Special Assets Team™ are facing significant potential losses on loans to dealerships and property owners as these once-thriving local businesses fall on hard times, fail and close. As in every crisis, a calm, guiding hand is required to minimize loss, maximize value and perhaps, to find an opportunity to build for the future. The JMBM Special Assets Team™ provides experienced counsel to lenders holding troubled loans to motor vehicle dealerships and to draw on JMBM's broad expertise representing motor vehicle manufacturers, secured lenders and real estate investors to help find and preserve value.
The JMBM Special Assets Team™ represents clients' financial interests that are put at risk by failing vehicle, farm implement and marine dealerships. JMBM does not represent consumers, motor vehicle dealers or franchisees; instead, we provide expert guidance for:
• Manufacturers who must address the problems created by failing dealerships
• Secured lenders who must take prompt action to preserve their collateral or defend lender liability claims and class actions
• Investors who have leased sales and service facilities to dealers.
About 10 years ago, one of our veteran workout professional clients realized that many bankers on his staff did not know what a receiver does, why a bank might want to have a receiver appointed and how a receivership works. He asked me to come to their offices and explain the concept of receiverships. I put together this Receivership 101 presentation for that seminar, and since then, I have presented this seminar many times in private in-house seminars we do for our clients, for the California Receivers Forum and for other professional associations.
Special Assets Lawyer.com: A Place Where Problem Loans and Troubled Debts Are The Topic of Discussion
Welcome to SpecialAssetsLawyer.com, a place where problem loans and troubled debts are the topic of discussion. I am Dick Rogan, bank lawyer and chair of the JMBM Special Assets Team™. Every day, problem loans of all types cross my desk and the desks of my colleagues here at JMBM. That's because we ask for them. Our clients are banks, special servicers, private lenders and others dealing with the fallout from the "Great Lending Bubble." Our clients challenge us to help them find value where all appears to have been lost. They rely on our collective years of experience to develop the right approach for each loan. Let's face it, our task is to work with our clients to make the most out of a bad situation.
Over the years, we've been asked by young people just joining a lender's workout team and by experienced lenders who have crossed over to the "dark side" of the bank to explain the tricks of the trade in dealing with special assets. In response, we created SpecialAssetsLawyer.com - a collection of some of our accumulated wisdom and a place for bank workout professionals to come find out what works when attempting to collect and deal with problem loans.