Secured Party Sale – Case Studies

Secured Party sale

A client had “hit the wall” and had run out of options to keep his business alive.  To make matters worse, his lender had demanded that he sell his home (securing his personal guarantee) to satisfy the secured debt.  Recognizing a potential opportunity for the client, we approached the secured lender and requested that instead of using the proceeds from the sale of the house to pay off the note, we asked that the corporate note be “sold” to our client for the amount of outstanding debt.  The effect was making our client the secured lender, since the note and security interest in the assets of the business were transferred by the bank to our client in satisfaction of the balance.  The next step was to deal with a large number of angry and unyielding unsecured creditors.  Using the vehicle of a secured party sale, our client hired an attorney who in turn, notified the creditors of an impending sale of assets and providing them the opportunity to bid on them if they chose to do so.  Our client then identified a non-blood relative to purchase the assets in a bulk sale for the amount for the amount of the note.  The result was the shedding of unsecured debt but the ability of the business to continue and pay these same creditors on a COD basis.  Our client was able to negotiate a management contract with the buyer, not only giving him current compensation, but also the opportunity to re-acquire the business based on the achievement of profitability parameters.