O'Keefe in the News

Boudreau Business Brief

Boudreau Business Brief

October 30, 2012

A Message from Mike Boudreau CPA, CTP, CFF

I hope all of you enjoy this newsletter and I wanted you to know I appreciate all the kind feedback and suggestions on how to make this a better publication. As an added benefit, I’ll be circulating to all of you in a couple weeks a short survey on the economic outlook for middle companies in fiscal 2013. The survey is being distributed to over 1,000 mid-western business professionals. I will summarize the results and provide the feedback to everyone. This survey will provide us with some interesting insight into projected middle market activity for 2013. The survey questions can be answered in just a few short minutes and all respondent identities will remain confidential. Your participation is greatly appreciated and all those responding will be entered into a drawing eligible to win an IPAD (2). Please look for this survey in a future communication from me.

Industry Spotlight – Concrete Contractors

The Concrete Contractors industry (1) is one of the oldest construction trades, yet the industry continues to grow with ever-expanding applications for modern buildings and infrastructure. Because industry performance depends on downstream demand from various construction markets, the recession and negative effects associated with it have hit Concrete Contractors hard in recent years. However, projected resurgences in the value of total housing, non-residential and infrastructure construction markets are forecast to return the Concrete Contractors industry to strong growth over the next five years. In 2013, non-residential building construction is forecast to increase 23.5% while housing starts are forecast to jump 34.5%. Consequently, industry revenue is expected to grow by 5.7% to $35.7 billion in 2013. Through 2017, industry revenue is expected to grow 4.5% per annum and total $42.7 billion.

Asset Recovery Strategies

An insolvent enterprise must weigh all of the relevant factors prior to selecting a strategy to maximize value. In prior newsletters, we discussed Receiverships, Chapter 11 and Chapter 7 Bankruptcies, Article 9 Sales and other winddown strategies. Today, let’s take a closer look at Assignments for the Benefit of Creditors (ABC’s). The ABC is an insolvency proceeding governed by state law rather than federal bankruptcy law. Some initial factors that might lend a situation to consider an ABC are as follows:

  • The enterprise is generating negative cash flow, thereby limiting the likelihood of a DIP lender.
  • A Chapter 7 Trustee is randomly appointed from an approved panel. In some instances, the Trustee may not be able to garner the highest value from the technology or the assets. An Assignee however, can be selected by the constituents.
  • The cost of an ABC is typically less than a bankruptcy filing.

Prior to selecting any strategy, it’s important to consider all the options and how they would impact asset values, net recovery values, creditor claims and equity positions. The constituents would be well served to seek the advice of insolvency professionals early in the process to identify the proper strategy and execution.