Legal news and trends for Canadian in-house counsel and c-suite executives
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present in any deal involving a company in financial distress: who are the credi- tors; what is the nature of the claims parties have; who has legal rights to various assets that might become part of the deal; are there secured assets in which secured creditors have interests and how can those be dealt with; how long will it take to get the transaction through the insolvency process; and what is the status of any priority claims, such as pension or other employee- related claims? What it really comes down to is extremely thorough due diligence, says Kohlenberg. Unlike a typical deal, transactions for struggling companies rarely come with a full set of represen- tations and warranties backed by an indemnity. And even if you land them, "you don't really have any remedy if they prove to be wrong." There are some options for those looking for deals, but are worried about potential encumbrances. Philadelphia, Pa., lawyer Raymond Agran, a business law partner at Saul Ewing LLP, advises in-house counsel looking for deals in the U.S. to read up on the "363 sale" process, where assets of insolvent com- panies can be sold off free and clear of liens and encumbrances. Agran has plenty of garden-variety mergers and acquisitions experience, but says that in the last few years he has done a "boat- load" of 363 deals. Many of the companies involved in this process are leveraged up, says Agran. A buyer will often look at them and decide that, rather than taking the traditional successor risk, they will get court-ordered certainty that approves the purchase and — aside from a small number of things such as union contracts — washes away factors that could prove troubling. "There's so much leverage all over the place, and people say they're going to fight a little A Tradition of Business Whether conducting business in Canada or across the globe, Aird & Berlis LLP understands the realities of your work. Our clients benefit from the firm's solid relationships with major institutions, government authorities and renowned national and international law firm affiliates. We combine the depth and strength of Canada's largest firms with the creativity and effectiveness of smaller firms. Count on us for legal counsel from a business perspective. Partnership. Results. Success.® Eldon Bennett Managing Partner ebennett@airdberlis.com 416.865.7704 Untitled-1 1 Brookfield Place, 181 Bay Street Suite 1800, Box 754 Toronto, ON M5J 2T9 Canada www.airdberlis.com INHOUSE DECEMBER 2009/JANUARY 2010 • 8/24/09 8:59:30 AM 17 Undervalued Real Estate Undervalued Real Estate Undervalued Real Es