Case Study:  Asset Recovery Group

Recovering Receivables In Bankruptcy 

We hear daily from banks and turnaround professionals that they are seeing more and more of their customers having problems collecting accounts receivable.  This causes those customers to pay back their banks/vendors very slowly and in some cases, not at all.

When clients call to alert us to this type of issue, there are a number of things we can do to help.  Often, with a review of the aging, we can begin to identify issues impacting their customer’s cash flow.  If we are involved early enough, we can help solve problems proactively.

Let me share some highlights from a recent case a bank client referred us to when their customer in the commercial lighting industry went bankrupt:

Problem:

• Our bank client had extended a sizable credit line to a commercial lighting company.   The lighting company had problems collecting their accounts receivable and was forced to file a Chapter 7 bankruptcy after the bank called its loan due.
• When the lighting company filed bankruptcy, they had $5 million in accounts receivable.  The lighting company had walked off some jobs leaving a number of their projects partially completed.   To say the accounts receivable were a challenge would have been an understatement!

Next Steps: 

• Receivables Control immediately contacted the lighting company and the Chapter 7 Trustee. We have credibility in these cases as we have provided customized collection programs for more than 200 liquidations in the building industry over the years. We also represent manufacturers and distributors in this sector.
• Receivables Control immediately dispatched a team on-site to meet the principals and trustee at the business location. We focused on a knowledge transfer involving the accounts receivable and contracts.  We retrieved all of the supporting documentation for the accounts receivable from several sites enabling us to upload the accounts receivable on our system so we could begin to manage the collection efforts at Receivables Control.

 Solution:  

• We surrounded the portfolio, working the accounts daily.  In addition to immediately “jump starting” the collection effort that was previously stalled, Receivables Control filed liens on several of the projects to protect the lighting company’s lien rights.
• We recovered 64% of the accounts receivable.  Better yet, 95% of those dollars were recovered without the use of litigation.  Collecting so much money without filing suit is the key to maximizing the return on a portfolio.  Non-litigation recoveries are a fraction of the cost of litigation and non-litigation recoveries turn much more quickly!
• Due to the high recoveries, the Estate was able to generate payments to fully satisfy the secured creditors and a portion of the unsecured creditors’ debt.

When you face the challenge of having to liquidate a difficult receivables portfolio, I would urge you to take a moment and visit with us.  Time is of the essence and a misstep can cost you many thousands of dollars.  When it comes to liquidating the receivables of a troubled company, we have “been there and done that”.  Given our vast experience, we provide you with valuable insight and solutions.

Kurt Huizinga is the Director of the Asset Recovery Group and has 25 years of experience working for businesses, lenders, consultants, and trustees.

Contact Kurt at (763) 315-9662 or email him at khuizinga@rccmn.com.