Ch. 25: Other Advanced Methodologies

• Corporate Strategies

Synopsis: Describes various complex corporate strategies that may be of use in certain debtor-creditor situations.

Definition: Recapitalization Strategy – A method of increasing the capital base of an entity under creditor attack by contributing a valuable but illiquid asset to the entity.

Definition: Dilution Strategy – A method of decreasing a creditor’s share or interest in an entity by issuing additional shares or interests to non-creditor shareholders or members.

• Migration Strategies

Synopsis: Describes the basics of the Migration Strategy.

Definition: Migration Strategy – A method of transferring assets by repeated sales of the assets to third-parties before a final sale to the target purchaser.

• Redemption

Synopsis: Describes the basics of the Redemption Strategy.

Definition: Redemption Strategy – A method of containing liabilities by an intermediate sale to a party in a debtor-haven.

• Devaluation Methodology

Synopsis: Describes the basics of the Devaluation Strategy.

Definition: Devaluation Strategy – A method of setting a low value for an asset by repeated sales to third-parties at successively lower prices, and which may include dissembling an asset with the idea of later reassembling it with the target purchaser.

• Backwardization

Synopsis: Describes the basics of the Backwardization Strategy.

Definition: Backwardization Strategy – A method for creating an apparent high sale value to defeat fraudulent transfer purposes, with a later reduction in price when the limitations period has passed.

• Structured Financial Products

Synopsis: Describes potential uses of Structured Financial Products in the debtor-creditor context.

Definition: Structured Financial Product – A financial product created to serve a transaction-specific purpose.

Definition: Replication Strategy – A complicated strategy for transferring wealth involving mirrored option arrangements and controlled counterparties, and based on particular future assumptions of market volatility.

Definition: Zero-Coupon Bond – Typically, a bond that has been stripped of its interest coupons so that only a single lump-sum payment is made at maturity.