Associate Konstantin Danilov Discusses Chapter 11 Valuations in Wall Street Journal Op-Ed

April 19, 2016

Analysis Group Associate Konstantin A. Danilov published an op-ed on The Wall Street Journal's Bankruptcy Beat website (also in the Dow Jones Daily Bankruptcy Review) in which he provides commentary opposing the view that companies that are reorganized under chapter 11 of the bankruptcy code are systematically undervalued. In “Commentary: Are Chapter 11 Valuations Unfair? The Data Say No,” Mr. Danilov examines historical valuation data in the context of the proposed reforms to the Bankruptcy Code by the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11. These reforms suggest that because valuations usually take place during economic “troughs,” companies are generally undervalued for the benefit of secured creditors and to the detriment of junior creditors. While not suggesting that every bankruptcy valuation necessarily realizes the correct value for various stakeholders, the research shows that chapter 11 valuations are not systemically skewed downward by historical standards. “Bankruptcy filings are a lagging indicator, meaning that their number generally peaks toward the end of a recession,” said Mr. Danilov. “Markets and valuations, on the other hand, are forward-looking and reflect investors' expectations of the foreseeable future.” He concludes that when properly performed, valuations should capture the debtor's true enterprise value. 

Mr. Danilov's article also featured prominently in the April 15, 2016, issue of the LSTA Week in Review: Oil Patching, Bankruptcy Valuations, Loan Technicals, LSTA Event Recaps & Litigation Update.

Read the op-ed