Equity Development Systems, Ltd., Special Situations Group marshals onsite 24/7/365 throughout the world to provide interim, workout and turnaround management teams to secure and operate troubled accounts facing operational or financial challenges. Our special situations-experts work closely with the secured lender and their legal representatives to protect, maintain and enhance the going concern value of the business and business assets that might otherwise be lost during bankruptcies, foreclosures, restructurings and replevin actions while actively pursuing permanent solutions.
The impact of complex and contentious litigation in many special situations can complicate, if not destroy, the secured lender’s position if not handled properly. Noncurrent, nonperforming, distressed, and troubled accounts present many pressing challenges. When problematic accounts and special situations do occur, our experienced—street savvy—proficient operations managers, keepers, receivers and special masters employ creative solutions that often reverse and cure special situations immediately.
EDS actively seeks to partner with owners, managers and creditors to achieve the best outcome for all stakeholders. These efforts often lead to exceptional investment opportunities for EDS’ Special Situation Group’s investment funds.
GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS… A Prudent Alternative to Bankruptcy.
The Process: A General Assignment (“Assignment”) for the Benefit of Creditors can be a prudent alternative to bankruptcy for troubled private and public companies and their creditors. It is a voluntary and arms-length transaction which provides a speedy, orderly disposition and equitable liquidation of the firm’s assets and subsequent distribution to its creditors. It is similar to a Chapter 7 liquidation process, but is far quicker and much less expensive and therefore generally derives a larger distribution to all creditors. The basic process in an Assignment is that the business (Assignor) turns over its assets to a third party (Assignee [EDS]) who is the responsible fiduciary for liquidating these assets and settling with creditors. The success of an Assignment is often predicated upon the credibility of the fiduciary. EDS’ unsurpassed umpire qualifications and credibility afford it unparalleled opportunity to serve as trusted Assignee—fiduciary for the benefit of all parties. The Assignee marshals the assets of the business, liquidates physical assets such as machinery, equipment, furniture, etc. and collects accounts receivable. A pro-rata distribution is then made to unsecured creditors of any or all monies remaining after all priority parties such as secured lenders, lien holders, etc. have had their interest satisfied.
Assets Held in Trust: By operation of law all assets are held in trust upon acceptance of the Assignment. These assets and the funds realized therefrom are protected against creditor claims. The assets are then liquidated and the proceeds, less administrative expenses, are distributed to all creditors according to their lawful priority class. The order of priority is very similar to that used by the Trustee in a bankruptcy proceeding.
Duties of the Assignee: The Assignee has similar duties to a Trustee in Bankruptcy. The Assignee is charged with acting in a business-like manner in disposing of assets. The Assignee has considerable flexibility in the methods used and does not have to obtain consent or have a hearing to ratify his or her actions.
Fees: Unlike Bankruptcy, no up front fees are required. The fee amount is determined before the documents are signed and becomes part of the General Assignment agreement. The fees for the Assignee are paid as an administrative expense from the proceeds recovered.
Advantages of a General Assignment: A General Assignment does not require court adjudication or consent in most states, nor does it require the consent of creditors. It does not have the stigma of Bankruptcy and frequently benefits the company’s principals who nearly always guarantee lender obligations of the company. Because a General Assignment avoids the administrative procedures that govern bankruptcy there is a considerable reduction of the cost of liquidation and the time necessary to sell assets. The consequence is that there is greater flexibility in liquidation methods and options with resulting greater returns for creditors. A General Assignment is an option that should always be considered as an option to bankruptcy.
