Ardais Corporation - Assignment for the Benefit of Creditors

Division: Phoenix Management Services


Client

Ardais Corporation was a $62 million venture-backed biomedical life sciences technology company that had experienced several rounds of funding, but ultimately had been unable to meet the expectations of its investors. As a result, the investors determined they were collectively unwilling to continue to support the Company.

Problem

The Company possessed substantial software technology products suitable for introduction to the marketplace, but existing management had been unsuccessful in capitalizing on these opportunities. A core group of employees and customers representing significant enterprise value were willing to stay engaged with the Company if a sale of the Company as a going concern could be achieved. It was understood by the investors that a full recovery of their investment was unattainable; however, their concerns were a professional closure of the corporation, preferably one outside of the bankruptcy process. This would allow the investors to insulate their reputational risk and allow for a going concern of the Company.

Solution

The Board of Directors of the Company determined that the most appropriate course of action was to execute an Assignment for the Benefit of Creditors (“ABC”), whereby the assets of the Company would be transferred to a third party fiduciary (the “Assignee”) for sale, with all proceeds provided to the creditors of the Corporation. Phoenix Management, thru its wholly-owned subsidiary PMCM, LLC, served as the Assignee in the ABC sale process. During the four-month sale period, PMCM operated the business under support from the existing senior lender on a limited scale basis. The strategy was to maintain both the core group of employees who possessed the key technical knowledge of the product and those core customers who had a desire to continue to utilize the Company’s biomedical software technology products. At the conclusion of the sale process, the Company’s assets were sold in a manner that maintained maximum enterprise value, allowed for a going concern of the Company, satisfied the senior secured lender in full, and provided a significantly higher return to all unsecured creditors than what would have been available in a traditional liquidation.