has specialized in corporate reorganization, restructuring and
bankruptcy law for more than 25 years. He also has a substantial
practice advising companies on the various aspects of their growth,
financing, contractual relationships and operations. In this capacity,
he often acts as outside general counsel to his clients.
1900 Avenue of the Stars
21st Floor
Los Angeles, California 90067
310.553.3610 Phone
bdavidoff@greenbergglusker.com
www.greenbergglusker.com
financial distress, management adopts a
"head in the sand" approach and cannot
recognize the urgency of the problem or
their responsibility in permitting it. While
it is inevitable that situations will occur
which are truly outside the control of
management, in the vast majority of cases,
management bears the responsibility for
the financial condition of the business.
Warning signs that the company's credit is
becoming unstable include the following:
ing that payments that otherwise have
been going to the customer are re-
quired to be paid directly to the bank;
lection lawsuits;
management staff.
is in trouble, depending on the amount
owed, it may be advisable to recommend
the customer engage a good turnaround
consultant. Too often the company
management's reaction to the hiring of
a consultant is that management knows
the business best, and believes that
someone else surely cannot direct the
business at its most critical hour. While
that may be true, almost invariably
management does not have experience in
how to deal with the issues surrounding
financial distress. The turnaround
consultant may not know the company,
but what he/she brings to the table is
an understanding of the issues that
need to be addressed when a company
is in financial distress. Certainly the
consultant needs to learn the business,
but understanding the mechanics of
financial distress and how it affects the
balance sheet of the company and its
creditors, and more importantly how to
Another important contribution from a
turnaround consultant is the credibility
that a qualified individual can bring to
the business's creditors, who may have
lost confidence in the entrepreneur and/
or his management team. The turnaround
consultant may be able to get additional
financing from the company's bank based
in part on his/her credibility. Typically
a bank will move a defaulted loan from
the regular loan officer to a "special
assets" officer. These bankers tend
to be much more hard nosed than the
entrepreneur may expect from the bank.
The special assets bankers are however
accustomed to working with turnaround
consultants. Often the bank will
welcome the engagement of a turnaround
consultant, and indeed in some cases
will recommend a turnaround consultant
to the business owner. This is because
the bank knows that the turnaround
consultant will be truthful and accurate
about current events in the business.
A turnaround consultant will also be
valuable if the business ultimately has
to file bankruptcy, since the experienced
turnaround consultant will have expertise
in the bankruptcy court process. He or
Distressed Businesses