Note from the Editor
This edition of the Asset Sales Committee Newsletter focuses on two areas of current concern to insolvency professionals charged with realizing value from intangible assets. Our new co-chair, Wes Anson, focuses on how to identify intangible assets in a bankruptcy or reorganization for the purpose of valuing, marketing or securitizing them. Wes illustrates how the process played out in a number of well-known consumer goods companies.
The transfer of customer lists owned by bankrupt enterprises will be strongly regulated under provisions of the amendments to the Code that become effective in October. John Sparacino and John Melissinos of Andrews Kurth thoroughly canvass the new provisions and analyze how transactions may be structured to accommodate the strictures of the new statute.
As we enter the “Brave New World” of BAPCPA and continue to generate value in the face of changing technology, our members have many insights to share with one another. We encourage you to submit pieces short or long for publication in this newsletter. Our next deadline for publication is August 25, 2005. Please do not hesitate to telephone or e-mail me with your ideas or submissions.
Gary
S. Jacobson
Herold and Haines P.A.
Tel. (908) 647-1022 - ext. 117
gjacobson@heroldhaines.com
Letter from the Co-chair
As the Asset Sales Committee progresses, there are ongoing changes regarding the ranges and types of assets being addressed by the committee. At its inception 10 years ago, the committee focused on intangible assets such as inventory, equipment and real estate. Over the past decade, a shift has taken place to include broader scopes of both tangible and intangible assets. With an increasing number of bankruptcies and reorganizations, the intangible asset component becomes, if not the dominant portion of the asset sale equation, at the very least, an interesting factor. Therefore, over the next few years, the committee hopes to be able to focus on the full range of assets – both tangible and intangible. The following article begins to address issues associated with identifying, valuing and securitizing intangible assets in a bankruptcy or reorganization.
-- Weston Anson
Intangible Assets: A New Source of Security and Securitization
IP Values for Lenders and Borrowers
Lenders, suppliers, CFOs and chief executives can improve the quality of their financial relationships and the quality of the security for those relationships by using a company’s intellectual property and intangible assets. These assets can provide added value, security and liquidity. They can come from a diverse range of intangibles, including:
| • Trademarks • Brand names • Corporate name and logo • Databases • Mailing lists |
• Software • Product designs • Manufacturing technology • Patents • Licenses / permits |
Whether the company is Polaroid, Amherst Brand Optics, Warnaco, Gloria Vanderbilt, ANC Corporation, Mossimo, LA Gear or Barneys, the fact pattern is often the same: In the absence of sufficient value from traditional tangible assets such as PPE, real estate, and inventory, each company was limited in its ability to extend its horizons, build new business or refinance out of a troubled situation. The solution was similar in all cases—identification and bundling of a company’s intangible assets, packaging those with greatest market value and then using those assets as a basis for securitization or refinancing.
Overview of New Provisions on Sale of Personally Identifiable Information
A potentially valuable asset of any company that deals directly with consumers is the personal information that the company gathers and maintains about its individual customers. Historically, this “customer list” information has been considered to be a company asset, property of a bankruptcy estate and freely transferable either inside or outside of a bankruptcy proceeding. However, along with the development of Internet commerce have come privacy concerns regarding the potential transfer or release of personal information gathered and maintained by “dot.com” and e-commerce companies, especially given the ease with which substantial private information may be gathered. While these information gatherers frequently have privacy policies posted on their web sites that may state that personal information will not be transferred, privacy concerns and creditors’ goals collide when a debtor-in-possession or trustee considers how to deal with this consumer information. In recent years, attempts to transfer this personal information have come under considerable attack on privacy grounds.