A major media company was taken private in a leveraged buyout (LBO) transaction. The company filed for bankruptcy one year later. Debtholders claimed that the LBO was a fraudulent conveyance action because the company was insolvent or inadequately capitalized at the time of the transaction.     

NERA was retained by counsel for the plaintiffs to analyze the solvency and capital adequacy of the media company at the time of the transaction. Dr. Faten Sabry led NERA’s analysis, which included evaluating solvency through market evidence of traded securities at the time of the LBO transaction, evaluating the credibility and consistency of various financial projections, estimating the value of the company using a discounted cash flow method and market approach, and surveying the contemporaneous views of equity analysts. NERA evaluated capital adequacy by analyzing the company’s financial profile under various financial projections, estimating the changing market views of the risk of default through credit default swap trading, and analyzing the views of credit analysts.

The results of the analysis were used in mediation proceedings and other negotiations between the parties and facilitated a settlement.