CaseMark Preparing Disclosure Statement Analysis
When To Use
- Reviewing a debtor's disclosure statement before a §1125 adequacy hearing
- Preparing objections on behalf of creditors, equity holders, or committees
- Evaluating plan feasibility projections for an investor considering a claim purchase or plan sponsorship
- Comparing the proposed plan's recoveries against a hypothetical Chapter 7 liquidation
- Advising a client (lender, bondholder, trade creditor) on whether to vote for or against a plan
Inputs To Gather
- Disclosure statement and all exhibits (financial projections, liquidation analysis, valuation reports)
- Plan of reorganization (or summary of plan terms if full plan is not yet filed)
- Schedules and SOFA (Statements of Financial Affairs) from the bankruptcy filing
- Monthly operating reports (MORs) for trend analysis of debtor's post-petition performance
- Claims register or claims summary — secured, priority, administrative, general unsecured, equity
- Debtor's prepetition financials (audited or unaudited 2–3 years) for baseline comparison
- Independent valuation or appraisal reports, if filed separately from the disclosure statement
- Key case orders — DIP financing, cash collateral, critical vendor, 363 sales
- Stakeholder identity — which constituency the analysis serves (secured lender, unsecured creditor committee, equity, potential plan sponsor)
Workflow
Assess "adequate information" under §1125(a)
- Confirm the disclosure statement describes the plan's classification structure, treatment of each class, and means for implementation
- Check for description of the debtor's history, business operations, and reasons for filing
- Verify disclosure of insider transactions, management compensation, and related-party dealings
- Identify material omissions — missing risk factors, undisclosed litigation, or unexplained assumptions [VERIFY against local court's adequacy standards, which vary by jurisdiction]
Analyze financial projections
- Compare revenue and EBITDA assumptions against historical performance in the MORs and prepetition financials
- Stress-test key drivers: revenue growth rate, margin assumptions, capex requirements, working capital needs
- Flag hockey-stick projections — where year-1 reorganized performance sharply diverges from recent actuals without clear operational justification
- Evaluate the discount rate or multiple used for enterprise valuation; compare to comparable-company benchmarks
- Assess the debtor's projected ability to service exit financing and plan consideration payments
Evaluate the liquidation analysis (§1129(a)(7) "best interests" test)
- Confirm all material asset categories are included (real property, equipment, IP, avoidance actions, causes of action)
- Check recovery assumptions for each asset class against orderly-liquidation and forced-sale benchmarks
- Verify Chapter 7 administrative cost estimates (trustee fees at statutory rates, wind-down costs, professional fees) [VERIFY statutory trustee fee schedule under §326]
- Compare per-class recoveries under the plan to per-class recoveries in liquidation
- Identify classes where liquidation arguably yields equal or higher recovery — these are potential objection vectors
Review classification and treatment
- Map each claim type to its plan class; flag any gerrymandering (splitting similar claims into separate classes to manufacture an accepting class)
- Confirm priority claims (§507) receive required treatment under §1129(a)(9)
- Check for unfair discrimination among classes of equal rank
- Evaluate whether any impaired class is being asked to accept treatment below the liquidation floor
Assess feasibility (§1129(a)(11))
- Determine whether the reorganized debtor can meet ongoing obligations without a likely need for subsequent liquidation or further reorganization
- Review capital structure post-emergence: leverage ratios, debt service coverage, liquidity cushion
- Evaluate management and governance changes — is the same team that drove distress running the reorganized entity?
- Assess contingent liabilities (pending litigation, environmental, pension) that could undermine projected performance
Identify confirmation objection grounds
- Summarize potential §1129(a) objection bases: inadequate information, best-interests failure, unfair discrimination, lack of feasibility, bad faith
- For cram-down scenarios (§1129(b)), evaluate whether the plan satisfies "fair and equitable" and "does not discriminate unfairly" for each rejecting class
- Note any unresolved claim disputes that could shift voting outcomes
Output
Structure the analysis as follows:
- Executive Summary — one-page overview of key findings, recommended position (support/object/negotiate), and critical risks
- Adequacy of Information — section-by-section assessment of disclosure completeness, with specific omissions flagged
- Projection Analysis — table comparing debtor projections to historical actuals and stress-case scenarios; highlight key sensitivities
- Liquidation Comparison — side-by-side recovery matrix (plan vs. Chapter 7) by class, with notes on disputed assumptions
- Classification & Treatment Review — class-by-class analysis with flags for gerrymandering, unfair discrimination, or priority violations
- Feasibility Assessment — qualitative and quantitative evaluation of post-emergence viability
- Objection Points — prioritized list of potential objection grounds with supporting analysis and case law references [VERIFY case law citations against current circuit authority]
- Recommendation — actionable next steps for the client, including negotiation leverage points
Quality Checks
- Every material projection assumption is compared to at least one objective benchmark (historical data, industry comp, or third-party report)
- Liquidation analysis covers all asset categories disclosed in the schedules; no unexplained exclusions
- Each plan class is evaluated for both the best-interests test and feasibility
- Stakeholder-specific bias is explicit — the analysis states whose perspective it adopts
- All jurisdiction-dependent standards are marked [VERIFY] (e.g., local adequacy rules, trustee fee calculations, circuit-specific cram-down precedent)
- No unsupported legal conclusions — factual findings are separated from legal arguments
- Financial figures cross-check between the disclosure statement, the plan, and the MORs for internal consistency