Lowstep Corporation filed for relief under Chapter 11 of the bankruptcy act on January 2, 2011. A summary of Lowstep’s assets and equities on this date, and at June 30, 2011, follows. Estimated fair values of Lowstep’s assets at June 30 are also shown.
| January 2, 2011 June 30, 2011 | ||
| Per Books | Per Books | Estimated Fair Value |
Assets |
|
|
|
Cash | $200 | $6,700 | $6,700 |
Trade receivables—net | 800 | 1,000 | 1,000 |
Inventories | 2,000 | 1,600 | 2,000 |
Prepaid items | 500 | — | — |
Land | 1,000 | 1,000 | 2,000 |
Buildings—net | 3,000 | 2,900 | 1,500 |
Equipment—net | 2,000 | 1,800 | 1,800 |
Patent | 4,500 | 4,000 | 0 |
| $14,000 | $19,000 | $15,000 |
Equities |
|
|
|
Accounts payable | $1,000 | $3,000 |
|
Wages payable | 500 | 1,000 |
|
Bank note payable (includes $500 interest) | 5,000 |
|
|
Long-term note payable (secured with equipment) | 6,000 |
|
|
Prepetition liabilities allowed |
| 12,500 |
|
Common stock | 7,000 | 7,000 |
|
Deficit | (5,500) | (4,500) |
|
| $14,000 | $19,000 |
|
The parties in interest agree to a reorganization plan on July 1, 2011, and a hearing to confirm that the plan is fair and equitable is scheduled for July 8. Under the reorganization plan, the reorganization value is set at $16,000, and the debt and equity holders will receive value as follows:
| To Receive Cash Consideration | To Receive Noncash Consideration |
Postpetition Claims |
|
|
Accounts payable (in full) | $3,000 |
|
Wages payable (in full) | 1,000 |
|
Prepetition Claims |
|
|
Accounts payable (80%) | 800 |
|
Wages payable (80%) | 400 |
|
Bank note payable and interest (80%) |
| $2,000 note payable |
|
| 2,000 common stock |
Long-term note payable (80%) |
| 1,800 note payable |
|
| 3,000 common stock |
Common stockholders* |
| 2,000 common stock |
| $5,200 | $10,800 |
*Reorganization value over consideration allocated to creditors.
The reorganization plan is confirmed on July 8, 2011, under the new name of Highstep Corporation. There are no asset or liability changes between July 1 and July 8.
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