Assignments for the Benefit of Creditors (ABCs)

An assignment for the benefit of creditors, or ABC, is a state-law process in which a distressed company transfers its assets to an independent fiduciary (called an assignee) to preserve value, conduct a sale process as a going-concern or orderly liquidation, and distribute proceeds to creditors. Often, an ABC offers a faster, more flexible, and lower-cost alternative to chapter 11 and avoids chapter 7.

Pachulski Stang Ziehl & Jones LLP represents mainly assignees and buyers in ABCs. The firm advises on pre-assignment planning, sale process design, auction strategy, distressed acquisitions, successor liability and fiduciary issues, litigation, and cross-border complications that can affect value and execution.

Because ABCs frequently sit at the intersection of fiduciary administration and distressed M&A, PSZJ approaches these engagements with both restructuring depth and transactions experience. The firm’s representations include ABCs involving manufacturing, retail, life sciences, intellectual property, and technology-related businesses.

The firm also advises clients on the new Uniform Assignment for Benefit of Creditors Act (UABCA) as one of its attorneys (Rob Saunders) participated extensively in drafting it as an advisor to the Uniform Law Commission’s drafting committee.

Assignee Representations

• Delaware: Represented the assignee in the ABC of a manufacturer of next-generation wind-energy systems, including strategy for liquidation and creditor recoveries.
• Delaware: Represented the assignee in the ABC of a nanotechnology-based catalytic-converter
  manufacturer. The matter culminated in an acqui-hire sale to a European strategic buyer after an
  auction process that included a prospective Chinese bidder, and involved a U.S. assignor that
  was the parent of a German subsidiary already in an insolvency proceeding in Germany.
• Delaware: Represented the assignee in the ABC of a luxury watch retailer that converted to a
  Delaware entity before filing in the Delaware Court of Chancery. The proceeding also involved
  New York subsidiaries, and the estate’s primary asset was litigation financed through a litigation-
  funding facility.
• Delaware: Represented the assignee in the ABC of a retail-display manufacturer, including issues
  relating to customs duties and negotiations with U.S. Customs and Border Protection.
• Delaware: Representing the assignee in an ongoing ABC of a biotechnology company that had publicly-traded equity with a patent portfolio directed to two separate treatment platforms.

Buyer Representations

• California: Represented a private equity sponsor in the acquisition of a manufacturer of furniture
  drawers through a California ABC sale process.
• California: Represented a strategic buyer in the acquisition of an online service business focused
  on automotive sales data through a California ABC sale process.