Fraudulent Conveyance
A major component of bankruptcy and fraudulent conveyance actions is forecasting what a company's future cash flows are likely to be, or what they would have been at an earlier point in time. Moreover, statistically defensible estimates about the range of reasonable projections in the past can determine whether a particular action was justifiable in a fraudulent conveyance action. This can be useful information in cases involving both a corporate defendant as well as those involving charges of constructive fraudulent conveyance against investment bankers, accountants, and lawyers who assisted in refinancing a company that failed sometime thereafter.
NERA's work and our testimony on the issue of inappropriate transfer of assets includes the analysis of whether the transferor was or could reasonably have been believed to be solvent or adequately capitalized at the time of the transfer and whether adequate consideration was received. We go beyond simple accounting estimates of the solvency of a firm at a particular point in time, and instead often investigate fundamental approaches to determining value, including the use of statistical analysis and option pricing formulas to estimate the probability that a firm would become bankrupt over some relevant time frame.
NERA also uses option techniques to determine how the value of an asset in a firm's possession would affect the value of shareholder, bondholder and other stakeholders' financial positions. Our related cash-flow-at-risk analysis also can be used to estimate the likelihood that cash flows will or would have fallen to levels that would trigger bond indenture covenants.
