cognient group

Solvency Opinions

Cognient’s expertise in the areas of valuation, restructuring, and mergers and acquisitions provides a strong foundation for rendering solvency opinions. Our solvency and capital adequacy analyses and opinions assure both the board and the company’s lenders that a transaction is not likely to subject the company and other creditors to undue financial distress. Since constituants such as Boards and Special Committees can be held personally liable in cases of fraudulent transfers, solvency opinions are often obtained to mitigate potential litigation and bankruptcy-related risk, as well as providing an added element of due diligence and evidence of good faith with regards to the particular terms of a transaction.

We provide solvency opinions for companies engaging in highly-leveraged transactions, including:

  • Leveraged Buy-Outs
  • Leveraged and Dividend Recapitalizations
  • Leveraged Dividends
  • Corporate Spinoffs
  • Stock Redemptions

 

A solvency analysis incorporates a combination of cash flow tests and valuation to determine if, after giving effect to a proposed transaction:

  • The sum of a company's assets at fair value exceeds its liabilities, including contingent, subordinated, un-matured and un-liquidated liabilities;
  • The present fair salable value of the company's assets exceeds the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured;
  • The company has sufficient capital with which to conduct its business; and has not incurred debts beyond its ability to pay such as they mature.