Chapter 11 Overview - Latham & Watkins

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Chapter 11 Overview

January 2016

Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. The Law Office of Salman M. Al-Sudairi is Latham & Watkins' associated office in the Kingdom of Saudi Arabia. ? Copyright 2016 Latham & Watkins. All Rights Reserved.

Chapter 11 Overview

? Provide debtor with breathing space from litigation and collection actions

? "Automatic stay" under Section 362 of the Bankruptcy Code stops all foreclosure actions and lawsuits upon the filing of a Chapter 11 petition

? Give debtor time and ability to restructure balance sheet and business

? Facilitate access to working capital through DIP loan financing

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Chapter 11 Overview (cont'd)

? Facilitate a "clean start" and the reorganization of a viable business

? Debt reduction ? Rejection of unfavorable contracts under Section 365 of the

Bankruptcy Code

? Foster equality of distribution to similarly situated creditors

? Avoid "race to the courthouse" ? Maximize value of assets and distributions

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Traditional Chapter 11 Timeline

Chapter 11 Petition Filed

First Day Motions Filed

Debtor obtains DIP financing and

management continues to run

business

U.S. Trustee forms Official Committee of Unsecured

Creditors

Committee retains financial

and legal advisors

Work on business plan

Negotiations with Committee and secured creditors

Consider assumption or

rejection of executory contracts

Decide on terms of

POR

Obtain exit financing commitment

File Disclosure Statement/ POR

Bankruptcy Court approves Disclosure Statement

Creditors vote on POR

Bankruptcy Court confirms POR

Debtor emerges from Chapter 11

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Bankruptcy Overview

January 2016

Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. The Law Office of Salman M. Al-Sudairi is Latham & Watkins' associated office in the Kingdom of Saudi Arabia. ? Copyright 2016 Latham & Watkins. All Rights Reserved.

Why Bankruptcy Purposes

? Ensure equality of distribution among creditors ? Avoid a race to enforcement ? Maximize value of assets and distributions ? Provide discharge from indebtedness and "fresh start" to debtor ? Rehabilitate financially viable business ? preserve operations and

save jobs ? Provide debtor with time and ability to restructure balance sheet

and business

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Why Bankruptcy Causes

? Too much debt ? Not enough liquidity ? Industry/company decline ? Mismanagement and fraud ? Catastrophic event ? Preservation/maximization of value ? Strategic reason (Chapter 11)

? Effectuate a transaction ? Reject leases ? Deal with labor

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The Bankruptcy Cast of Characters

? The Bankruptcy Court ? Company / Borrower / Debtor-in-Possession

? Bankruptcy Trustee

? U.S. Trustee ? Creditors

? Secured creditors ? Unsecured creditors ? Creditors' Committee

? Owners / Stockholders

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