PRACTICE AREA
Financial distress changes everything. The transaction that once focused on growth, expansion, or acquisition suddenly becomes a distressed situation where focus must be on liquidity, preserving value, and maximizing recovery as efficiently as possible.
Dorwart represents banks, private lenders, investors, and businesses in distressed situations, restructurings, workouts, receiverships, and bankruptcy proceedings.
Some restructurings are resolved through negotiated workouts. Some restructurings need the tools available through receiverships, foreclosure proceedings, or bankruptcy proceedings. Whether maximizing recovery involves right sizing the balance sheet through debt for equity exchanges, targeted asset sales, corporate re-alignment, strategic sales, new capital infusions or some other combination of these and other business and legal restructuring tools and transactions, Dorwart understands those tools and transactions and can find the combination of tools and leverage to achieve the best possible outcome.
In every distressed situation, the objective is the same: maximize economic outcomes while minimizing avoidable losses.
We understand both the business and legal imperatives in distressed situations. Cash is king, so we work with the business and appropriate financial advisors to understand liquidity, who has control of it, and how it can be captured and put to use. We quickly analyze debt structure, collateral positions, guarantees, intercreditor arrangements, and stakeholder incentives to understand where leverage lies, where value can be preserved – and where it is at risk. We then put that knowledge to use for the particular stakeholder we represent.
Restructuring is about maximizing economic recovery. Understanding the legal arguments, potential litigation forums and tools, capital structure, liquidity, business, costs, risks, and timing issues associated therewith are all tools to be put in service of client recovery, not ends in and of themselves. Foreclosure, receivership, a bankruptcy sale, or a debt exchange may be a tactic to pursue or defend against, but it is never the goal. Each is simply a means of applying leverage to maximize our client’s recovery.
No two restructurings are alike. Every matter presents different stakeholders, incentives, leverage, risks, and opportunities. Effective restructuring counsel must understand all available tools and know when and how to deploy them.
Many restructuring matters become overwhelmed by legal complexity. We focus on the outcome.
Our experience allows us to quickly understand capital structures, identify leverage points, assess economic realities, and develop practical strategies for maximizing value. The more complicated the situation appears, the more important it becomes to separate what matters from what does not. That is where Dorwart provides the greatest value.
Dorwart represented a bank participating in the lending syndicate of a specialty finance company that provided financing to automobile dealerships across the United States.
Signs of deterioration appeared early. As operational, governance, and intercompany issues intensified, the restructuring became increasingly complex. Multiple parties pursued competing strategies while the value of the underlying loan portfolio remained at risk.
The longer the situation continued without decisive action, the greater the risk that portfolio value would erode and creditor recoveries would decline. At the same time, the matter generated significant litigation issues that threatened to distract stakeholders from the central objective: preserving value.
Dorwart advocated early intervention when signs of distress first appeared. As the company’s sale process and internal decision-making deteriorated, we pushed for a strategy focused on gaining control of the portfolio rather than becoming consumed by collateral disputes and litigation battles.
We encouraged the lending group to evaluate credit-bidding and other control mechanisms before asset value was lost.
Rather than treating litigation as the primary objective, Dorwart consistently focused stakeholders on preserving and controlling the underlying assets. That shift ultimately positioned the lending group to take control of the portfolio while preserving litigation claims for later pursuit if economically justified.
The lending group gained control of the assets before significant additional value erosion occurred and was positioned to focus on monetization and recovery rather than prolonged disputes over process and blame.
Represented the agent for the senior lending group in the Unit Corporation oil & gas bankruptcy. We developed a plan for DIP financing with a roll-up of the first lien debt in conjunction with a restructuring support agreement negotiated with an acquiring interest. When certain lenders initially balked, we pointed to certain provisions and potential outcomes in the existing structure and convinced all lenders to participate in the new money DIP financing. The DIP financing and pre-petition first lien debt were paid in full with interest and fees.
Represented a minority lender in a troubled oil and gas credit and successfully influenced the direction of the lending group despite holding a relatively small position within the capital structure. The agent had strong ties to other stakeholders and we viewed the positions taken as not sufficiently aggressive.
The strategy ultimately resulted in refinancing and repayment without loss. This theme has been repeated in multiple syndications in multiple industries and with several different agents.
In senior healthcare, certain playbooks by sponsors seem to repeat: delay, sponsor/guarantors won’t step up, try to make losses a lender issue, not an equity issue, while also trying to hold on to equity. That play was being run, the bank expected a loss of $5 million to $7.5 million. Through creative application of leverage, litigation, and creative forbearance milestones and collateral terms, the bank exited the credit with only a $250,000 loss. Lender considered it a top ten special assets workout that has been used as a “lessons learned” training.
Dorwart has represented creditors, lenders, committees, acquirors, and other stakeholders in distressed situations involving businesses across virtually every major industry sector.
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