Insolvency Financing for Individuals and Companies

Insolvency litigation has challenges. While legal claims may represent a crucial asset for insolvent estates – they can be the only means of recovery for unsecured creditors—pursuing such claims requires financing and risk. Even though a creditors’ repayment may be contingent upon successful insolvency litigation recoveries, potentially valuable claims are often litigated or settled for a value below the amount that could be realized with proper resources. Increasingly, insolvent estates look to Pravati Capital to pursue pending legal claims.
Third party insolvency financing provides the opportunities for a host of parties, including creditors and their lawyers, large corporations, bankruptcy trustees and receivers, to maximize the value of litigation insolvency claims. If resources to investigate or advance claims are limited, Pravati can provide funding so that claims can be pursued on their merits and settlement is not under-valued. Pravati Capital can provide resources for funding and management of complex and lengthy litigation, including safeguards regarding adverse cost risks. We can offer value-added solutions to companies affected by insolvency.
Insolvency is defined as a financial state of being that is reached when you are unable to pay off your debts on time. It is not to be confused with bankruptcy, which is a legal process that serves the purpose of resolving the issue of insolvency. An insolvent company means it is unable to pay its debts: either it does not have enough assets to cover its debts, or it is unable to pay its debts as they fall due.
Claims that were already in existence or contemplated prior to the insolvency include intellectual property litigation, contract disputes, breach of duty claims and tax refund claims.
Financially troubled companies can further benefit from Pravati’s financial restructuring and insolvency team. Key to a successful insolvency case is having the right team in place: people with expertise in the right jurisdictions, from offshore attorneys to investigators to digital forensic experts. An insolvent company will likely have no assets on its balance sheet and no cash in the bank. Or its assets been intentionally stripped out of the company and transferred to third parties. Recovering assets off the balance sheet can be expensive: Pravati funding can be critical to ensure a successful outcome.
Our funding can also increase pressure to reach a sustainable settlement. Once the defendant is aware of the funding, it shows that a sophisticated third-party has invested their own capital after carefully investigating the case; has the expertise to identify the claims most likely to yield significant recoveries and can select competent insolvency lawyers who can negotiate the right agreements for each claim. And that the claimant has the financial ability to go to trial if necessary.

Insolvency Cases: Funding for Law Firms

A third-party funder is interested in an insolvency claim that has intrinsic merits and is being conducted by an experienced, competent legal team. Pravati funders can provide non-recourse capital to law firms that litigate insolvency cases on contingency, allowing increased cash flow and decreased risk exposure. A law firm can thereby take on litigation expense risk when a cash-poor estate is unable pay its own litigation expenses, for both substantial individual cases or across portfolios of cases. And at the same time, law firms can capitalize on the expansion of its contingency business.
Pravati Capital can help lawyers and their clients by assuming the cost and risk of litigation from the outset. Third-party funding to lawyers allows them to partner better with their clients and at the same time add value to their businesses and firms. Pravati enables law firms to manage the risk and financial burden of their insolvency balance sheets, and at the same time provide cover from expensive hourly rates and expert fees.
It is no wonder that third-party funding for insolvency litigation is on the rise. Pravati is increasingly focusing on the insolvency sector, and insolvency attorneys are eager to work with us.

Along with Restructuring and Insolvency cases, our areas of work include:
Bankruptcy investigations and examiner representation
Chapter 11 debtor and trustee representation
Complex loan restructurings
Cross-border insolvency representation
Debtor-in-possession and exit financings
Dispute resolution and litigation
Energy sector restructurings
Executory contracts, leases, intellectual property licenses and forward, swap and trading contracts
International bankruptcy cases, insolvency arbitrations and cross-border proceedings
Lender liability
Municipal restructuring and bankruptcy
Official creditors’ committee representation
Pre-packaged, pre-negotiated and traditional plans
Sale and purchase of distressed assets, debt and portfolios
Valuation and solvency proceeding

*In some instances, court approval may be necessary before receiving Insolvency Financing.

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