     Voigtkampff | Wednesday, February 16, 2000 - 04:14 am 
A couple asked me advice on whether to file bankruptcy. I am not sure and need help.
The Debtor's company may be going public - initial public offering. Because of his relatively large debt, the board has required him to step down from his position before going public. Is a bankruptcy viewed more positively than outstanding debt when dealing with an IPO? This must be registered with the SEC, right? One view that I can anticipate is that it can't be worse, so they might as well file bnk. I won't accept such reasoning and I am looking for facts or experience. Why is an individual's debt a factor here? How might I improve the situation for them?
I would assume that bnk would either be no worse or better. But I will not advise them based on my assumptions.
My very tentative advice it that they wait a period of time, long enough for the creditors to feel that their account receivable has little value. Then the debtors can use what they have, even if it means liquidating exempt assets, to settle with the creditors. This might mean that a charge off shows on the credit report. OK, but a few of the debts may already be charged off. And it has been 4 years since some were paid, so for at least a few we are nearing the 7 year period. Besides the IPO, and not credit, is the issue for them.
I wonder what the issue with IPOs is. Is the problem with debt the fact that it harms credit, or the fact that the SEC requires some disclosure? If the problem is the latter, then maybe it is better to pay a discount and settle the debts, that way there would be no debts to disclose to the SEC.
I appreciate any opinions, experiences or facts. But I ask that you please label them as such. Since I have no educated opinion on this, I will end up adopting the first reasonabe one that I hear, and would like to know the basis for my new opinion. |
| Barry N | Wednesday, February 16, 2000 - 08:38 am
Voightkampff,
I have no real suggestion one way or another. But I do have an assumption or two.
I too am in the process of seeking investment funding for our website, and attornies here have pointed out that my credit history is indeed a factor in procuring funds. Potential investors do want to see the founder of a business as being wise money managers. In order for us to solicit investments via the public or private offering we do have to file with the SEC. And my mentors tell me that they do a background check on the principles involved.
As far as IPO is involved, I would assume the BOD is very much interested having their house in order before they get scrutinized by the brokerage firms as well as the potential investors. BTW,I am sure if I get to that point I will be asked to step aside, and I will be glad to. But it does not mean I would give up controlling interest in the company. This is something your client should stress.
I wish your client the best of luck, and hope you're able to give him the guidance he needs. If he has options and stock ownership in the new company, be aware of the waiting period before they can actually sell off any shares. Many IPO millionaires get caught in this trap...having hoped to be able to pay off debt through profits from the offering. I beleive you have to wait 6 months before you can sell off shares.
Just my thoughts,
Barry N
CreditMania,com Inc. |
| Christine Baker (Admin) | Wednesday, February 16, 2000 - 10:43 am
Aren't they getting advice on putting their offering together? There must be some experienced legal/financial people involved who KNOW the answer.
And how about the SEC, don't they publish their rules? |
| Voigtkampff | Wednesday, February 16, 2000 - 02:27 pm
Apparently the advice that they were given was to dump my guy. Playing it safe. I am sure that there is info out there. I'm just being lazy. Also I find that a lot of the time, practice can be just as important as the actual rules. |
