Financial Services Case Studies
Silicon Valley Law Group’s (SVLG) Financial Services Group won a judgment against a shareholder who had diverted large sums from his corporation while it was in Chapter 11. SVLG represented one of the largest banks in the United States as well as the bankruptcy trustee. The court awarded our clients $1,000,000, including all of their legal fees.
Silicon Valley Law Group structured, negotiated and documented secured loans by our commercial bank clients to a variety of enterprises, from software companies to a national golf course operator. SVLG’s Financial Services Group crafted security interests in non-standard collateral, including intellectual property and a concession contract with a government-owned corporation.
Silicon Valley Law Group’s client, a parent corporation of a chapter 7 debtor, had invested more than $1,000,000 in capital and made more than $12,000,000 in loans and advance to the subsidiary before the bankruptcy. The bankruptcy trustee sued our client to invalidate its security interest in the assets; to deny the client’s right to recover and to force the client to pay back large sums of money it had received from the bankrupt subsidiary. The Financial Services Group settled the case. Our client was not responsible for paying back any of the debts or any of the money it had received, and the bankruptcy trustee was ordered to pay our client a substantial sum.
Silicon Valley Law Group represented a long-haul trucking company that was not licensed to provide pickup or delivery services in California. It learned of an opportunity to acquire the operating assets of a firm that provided such services. The target company was in Chapter 11 reorganization. The deal had to be done quickly to preserve the customer base and to minimize the loss of key personnel. Our Financial Services team helped to complete the acquisition in near-record time. They worked with the client and the seller’s counsel to negotiate and document the transaction, to address the concerns of the employees, customers and creditors; to overcome the objections of a competitor and a lender who opposed the sale; to prepare for the contingency of competing bids for the assets; to obtain bankruptcy court approval of the sale procedures and the sale itself; and to close the deal – all in less than six weeks’ time. Our client achieved its most important objectives:
- It can now deal directly with its long-haul customers instead of having to rely on others to pick up and deliver their cargo in California;
- It had the option, during an evaluation period after the closing, to transfer back to the seller any leases or contracts that proved to be undesirable;
- By acquiring the assets through the bankruptcy court, our client did not assume any of the seller’s unwanted liabilities, and it is protected against successor liability; and
- By getting the deal done so quickly, the key relationships with employees and customers, and the going-concern value of the business, were preserved.
When Circuit City filed its Chapter 11 petition it owed our client, a vendor of digital media products, more than $970,000. After it confirmed its plan of reorganization, Circuit City’s liquidating trustee sued our client for more than $560,000 in alleged preferential transfers.
The SVLG team that transformed this double whammy of liability into a huge victory. We persuaded the trustee that he was unlikely to prevail. The litigation, which was filed in the Richmond, Virginia Bankruptcy Court, was settled without our client having to pay a single dollar. The preference action was dismissed; our client was released of all liability; and our client retained more than 95% of its claim. Instead of paying to settle the litigation, our client will receive a substantial distribution. The first installment of the distribution, a substantial cash payment, already has been received. All of this was achieved at minimal cost in just a few months.
Our client, a venture lender, has built a portfolio of successful investments. The exception was a loan to a shipping company that had developed a unique software product to manage and track individual shipments from door to door, anywhere in the world, on any carrier. The shipping company failed when the global economy crashed.
After evaluating its options, our client elected to foreclose its security interest under the UCC by conducting a public sale of the company’s assets. We helped design the publicity campaign, write the advertisements, identify websites and publications on which to publish the ads, and negotiate the rates and terms. With our assistance, our client formed a subsidiary and transferred the loan to it before the sale. We planned each step of the public sale, which went smoothly, precisely as planned. The subsidiary, which acquired the assets as the winning bidder is now restarting the business on a “software as a service” model, licensing the software to shippers.
The SVLG team that helped transform this potential loss into a big win for our client.
Our client received wire transfers to her bank account in California from a family member overseas. Two years later she was dismayed when a bankruptcy trustee sued her seeking to recover those transfers. The trustee alleged that the transfers were avoidable because they were preferential or fraudulent. In less than three months SVLG attorney Jagdeep Hansra persuaded the trustee to dismiss the lawsuit because the court did not have jurisdiction over our client. Our client paid nothing and kept 100% of the funds that had been transferred to her.