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Untitled Document

Service Industry -- Personnel staffing company

Bankruptcy 363 Sale

We were referred to the client, a $20,000,000 personnel staffing company, by its asset based lender. The staffing company was being negatively impacted by a slowdown in manufacturing activity in its local markets causing operating losses and severely straining its availability under its loan agreement. After analyzing the business, it was determined that it would not be possible to shrink the operation and return it to profitability because of the fixed costs associated with data processing equipment and related staffing requirements that had been committed to enable the company to support a significantly larger business model. It was impractical to replace that equipment and software with a less expensive alternative because of both time and financial constraints.

A forbearance agreement was executed with the lender under which the company agreed that it would search for a buyer of the business as a going concern. The original plan had been to sell the business and use the proceeds to pay off the secured lender and effectuate an out of court settlement with the company's unsecured creditors. Despite initial success in securing offers from prospective buyers two deals fell through. During the process the major unsecured creditors were periodically apprised of the progress of the sale but as time wore on an involuntary chapter 11 was filed against the company.

We brought a third buyer to the table as the involuntary proceeding was filed and the sale was ultimately concluded under section 363 of the bankruptcy code.