Court Approves Noteholders' Plan of Reorganization, Client Wins $173 Million Valuation Dispute
Client: Company Noteholders
Challenge: Value Noteholders' Collateral in a Volatile Economic Environment
The noteholders for a private, integrated steel manufacturer operating in bankruptcy engaged AccuVal to appraise the company's assets in connection with their reorganization plan submitted to the U.S. Bankruptcy Court. With $500 million in annual sales of hot and cold-rolled steel to the specialty market and automotive industry, the company had been a casualty of the declining American steel sector during the late 1990s.
AccuVal Approach
At the time of the engagement, the steel industry was making a sharp U-turn from its downward cycle and undergoing a rapid recovery. The appraisal was complicated by the fact that most of the industry merger and acquisition transactions occurred during the depressed steel industry cycle. AccuVal had to analyze the company along with these transactions and current market data to reflect the industry's changing fortunes.
AccuVal appraised the business enterprise and all of its underlying assets, including machinery, real estate, inventory and intangible assets. As part of its due diligence, AccuVal contacted buyers and sellers in the marketplace and reviewed the company's income and cash flow projections, which were further complicated by the rapidly changing cost of raw materials. AccuVal also considered the condition of the equipment and estimated the capital and maintenance expenditures required for the mill to service its customer base and remain competitive in the market. The proper methodology for the valuation of these process-oriented assets was of great debate during the case. AccuVal provided the court with an appraisal report supported by facts, research and the proper application of valuation principles. This report was accepted by the court and became the basis for the valuation of the underlying assets without adjustment.
AccuVal also helped the attorneys capitalize on the strengths of their case and attack the challenger's weaknesses. After conducting a detailed review of the work performed by two separate appraisal firms working for the competing plan of reorganization, AccuVal identified a wide variety of flaws and inconsistencies and later testified to these flaws.
Bottom Line: Court's Acceptance of AccuVal Valuation Results in Noteholders Recovering Additional $83 Million of Value; Court Rejects Both Evaluations Conducted by the Opposition
The judge accepted AccuVal's evaluation and the noteholders' reorganization plan. Conversely, both appraisals conducted on behalf of the equity holders were not accepted by the court because of the flaws brought to light by AccuVal.
The AccuVal AdVantage™
Strong and strategic litigation support. Competent expert witnesses. Evaluations that stand up to rigorous challenges. Experience in virtually every segment of the steel and specialty metals industries. A leader in valuing businesses and all related business assets using real market information. Experts in analyzing financial performance, barriers to entry, competitive factors, capital expenditure and maintenance requirements. That's The AccuVal AdVantage™ at work.
© 2013 AccuVal Associates, Inc. All Rights Reserved