Kroll Restructuring Explained: Legal Notices & Their Significance

What is Kroll Restructuring Administration?

Kroll Restructuring Administration helps companies in financial distress or facing insolvency through its independent restructuring experts. These professionals provide services that include advising distressed companies and their stakeholders, and serving as monitors, receivers, or trustees in insolvency proceedings. Furthermore, Kroll Restructuring Administration encompasses the former Prime Clerk LLC, which has been a leading administrator in various corporate proceedings for several decades. Consequently , Kroll Restructuring Administration brings a wealth of experience and a global perspective to the administration of companies in financial trouble. To facilitate its services in the United States, Kroll Restructuring Administration is operated by an affiliate and its senior team members are certified public accountants, attorneys, and restructuring specialists. Their expertise covers a diverse range of industries, with a special focus on the financial services and insurance sectors.

The Legal Notice Explained

While Kroll Restructuring may contact you by email or telephone to alert you to a company’s bankruptcy, they still must follow the law and send out a formal legal notice. The notice is often sent by U.S. mail but is now increasingly sent by email.
The legal notice typically will include the following information:
An attorney for the Debtor or Debtors will prepare the legal notice of the bankruptcy and accompanying documents to be filed with the Bankruptcy Court. These documents are typically designed to provide sufficient information about the bankruptcy proceeding so that creditors of the Debtor or Debtors can make choices about what actions they want to take. Once the legal notice and accompanying documents are filed with the Bankruptcy Court, the Exhibit A that will be attached to the legal notice will typically be a copy of the bankruptcy petition and/or a similar document that identifies the Debtor or Debtors involved in the legal notice.
More comprehensive legal notices related to voluntary Chapter 11 Debtor or Debtors often contain the following additional information:
Not all legal notices are exactly the same. If you have questions about the legal notice you received from a Kroll Restructuring employee, you should consult your own attorney or one of the attorneys at Davis & Santos, P.C.

What Do You Do Upon Receipt of a Legal Notice?

The first step to consider upon receiving a notice from Kroll Restructuring is to run the notice by counsel who may be able to shed additional light on the situation. With respect to the legal and financial implications of the issuance of the legal notice, those issues will depend on the facts and circumstances specific to each recipient, including their role vis-a-vis the debtor and relevant contractual documents.
In particular, one issue that should be given careful consideration is whether the recipient has been identified as a contract counterparty to the debtor. A contract counterparty should consider whether they might have a "rejection" claim against the debtor. Bankruptcy Code Section 365(g) includes language that in part specifically addresses the treatment of rejection claims. Any person or entity listed as a debtor contract counterparty should understand the rejection-related implications of a debtor’s chapter 11 filing because such rejection claims tend to be treated less favorably than other unsecured claims.

Legal Notice Misconceptions

One of the most common misunderstandings is that a Kroll notice, or any legal notice for that matter, is an indication that you are, somehow, in trouble. The opposite is generally the case. For example, a notice regarding a Chapter 11 case in the U.S. Bankruptcy Court for the Southern District of New York is usually nothing more than a notification that a creditor has been named in the bankruptcy case of a company to whom you provided goods or services. It is simply that – a notice. Any company that has undergone a Chapter 11 process, or any other insolvency process, has a legal obligation to provide notice of its case to it creditors. In the case of a U.S. Bankruptcy Court case, this is a requirement of the U.S. Bankruptcy Code and Federal Rules of Bankruptcy Procedure. Kroll Restructuring is the firm to which the U.S. Bankruptcy Court has outsourced the task of providing those notices. A notice does not mean that any action is required of a creditor, nor does it mean that a creditor is a party-defendant or otherwise involved in the case . Again, all this means is simply a notification that the company in question is in bankruptcy – with a link to a place to find additional information (such as a general schedule of claims – which can be found at www.kccllc.net/10ethyltel). It does not mean that Kroll is investigating or otherwise interested in your company.
Another misunderstanding is that a Kroll notice is connected to a public company – in other words, one that a creditor may have heard about within their industry, perhaps due to the fact that it is publicly traded. Absolutely not. Most Kroll matters are private and unreported. Kroll’s corporate restructuring database is one of the best in the business, containing centuries of data from international restructurings of companies large and small. Even a company with a rather large market cap is likely not on the radar of Kroll. Only a small fraction of cases come to Kroll that are public.

Business and Stakeholder Consequences

Businesses and stakeholders can be significantly impacted by a Kroll restructuring legal notice. From a financial perspective, the Kroll restructuring can lead to an increase in the costs of capital for businesses in the affected area, as well as increased costs related to production, logistics, and insurance when propert in that area becomes damaged. The type of damages that a Kroll restructuring can cause can lead to increased costs for equipment replacement and retooling, inventory replenishment, temporary or permanent facility relocation, temporary workers, and employee training. In addition to these costs, there is a loss of revenue when production capacity is reduced or out of commission for relatively long periods.
Operations of affected businesses can also be significantly impacted by a Kroll restructuring. There is a risk that supply chains in those areas may become bottlenecked, and the parts of supply chains outside of the affected areas may cease using business located in the affected areas, because other businesses may be able to provide goods at a lower cost due to the lack of risk associated with being near a Kroll restructuring. Another risk is that necessary services, such as parking lots, loading docks, and mail processing facilities, may disappear, leading to secondary damage.
Reputations can also be at stake, as the market may determine that normal operations cannot be considered safe in the affected areas unless the Company provides additional safeguards, even if the level of risk is acceptable to customers.

Getting Professional Advice

When dealing with restructuring situations and legal notices, it is of utmost importance to seek professional legal advice and professional assistance . While Kroll Restructuring may be experienced in matters of debt restructuring and procurement, it is critical to seek the advice of an attorney with experience in commercial law and creditor rights under applicable state law in any event such circumstances may be required.