Focus Management Group

Alternative Repayment Source? BP Oil Spill Funds

By: Juanita Schwartzkopf, Managing Director

 

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The news media along the Gulf Coast has been covering the trial related to the explosion of the Deepwater Horizon Oil Drilling Platform in 2010.  Lawyers are encouraging businesses along the Gulf to file claims and pursue potential payments from a trial settlement.  The focus has been on businesses that have experienced any kind of disruption, and the need for those entities to file a claim to be part of the settlement.

To a large extent, lenders have not been actively pursuing their potential rights to funds received from those claims.  This should change!

Who Should File?

Businesses with potential impact are not just hotels, fishermen, and all the other entities that immediately come to mind.  Businesses that experienced an impact could be accounting firms that did not have their usual clients, medical practices whose patient counts were down, etc.

All businesses along this region should explore the potential negative affects the oil spill has had on their businesses.  The businesses need to be realistic as fraudulent claims are being targeted for legal action, but that said, many businesses experienced the negative impact of tourists not coming to the Gulf Region, or consumers questioning any food products from the area.  Then, the negative impact trickled down to businesses serving the first wave of affected enterprises, and the second wave, etc.

When reviewing financial performance since 2010, it will be important to consider the potential impact of the oil spill as a contributing factor.

How would this benefit the lender?

If a lender is experiencing difficulty being paid as agreed by a borrower in the Gulf Coast region, the lender needs to consider the impact of the oil spill and discuss the potential ability to file a claim with the borrower.  In some cases, the lender may actually need to encourage the business to file a claim.

If the lender does not already have a collateral interest in any potential settlement, the lender should consider negotiating a collateral interest in the potential settlement that might be received from a claim.

Lenders need to consider this possible source of repayment when they are reviewing their portfolios.

Next Steps

When reviewing performance of portfolio companies, consider any potential impact of the Gulf oil spill.  If there is a potential negative impact, discuss options with the borrower.

Focus Management Group is able to assist lenders, and their customers, in proving the value of the lost business.  In the process of filing a claim, it is important to accurately estimate the potential loss – and to be as thorough in developing substantive claim support as possible.  The financial advisory services Focus provides to businesses, gives us a unique ability to provide that support – as a trusted, third party advisor who is able to substantiate a claim. Focus Management Group is a leading business restructuring firm headquartered in Tampa, with offices in Atlanta, Chicago, Cleveland, Dallas, and Los Angeles. For more information on our experience with successful turnarounds or restructuring in the Petroleum Industry, contact us.

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