When an organization—even a highly successful one—experiences a sudden financial downturn, it may need to consider such options as reworking its financial structure or seeking bankruptcy protection.
Even for those with prior experience, it can be a challenging time, with numerous parties competing for limited rewards and the likelihood of events turning adversarial. That’s why having the right adviser to offer answers and support can be so critical.
A debt workout is certainly not “business as usual” for executives used to focusing on day-to-day operations. Suddenly, there’s the challenge of creditor negotiations that may determine the organization’s survival.
There’s a whole new set of unfamiliar questions that must be answered: What are the tax consequences of a reorganization within a bankruptcy proceeding versus one outside bankruptcy? How do you determine the tax cost of asset sales? What are the tax effects of intercompany reorganizations? How can you mitigate potential limitations on the use of net operating losses and other valuable tax attributes?
The pressures on management during bankruptcy proceedings can be intense and open up a whole list of other questions as well: How do we prepare a plan of reorganization? Which creditor claims should be protested? How should we respond to due diligence requests?
Experienced advisers have helped organizations address these challenges many times before and know the process well. They can project credibility to the players on the other side of the table—providing stability when clients need it most.
Do you want to deal with every obstacle surrounding a troubled company—or do you want to get back to running the business? The TRS team of KPMG’s M&A Tax practice can help position you for success by focusing on key bankruptcy issues.