Evaluates Chapter 11 disclosure statements with plan description adequacy, feasibility projections, and liquidation analysis comparison. Use when reviewing disclosure statements, analyzing plan feasibility, or preparing objections.
Scanned 9/12/2026
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---
name: preparing-disclosure-statement-analysis
language: en
description: Evaluates Chapter 11 disclosure statements with plan description adequacy, feasibility projections, and liquidation analysis comparison. Use when reviewing disclosure statements, analyzing plan feasibility, or preparing objections.
tags:
- preparation
- distressed-and-restructuring
metadata:
author: casemark
practice_areas:
- Restructuring
- Distressed Investing
- Turnaround
document_types:
- Preparation Document
skill_modes:
- Preparation
---
# Preparing Disclosure Statement Analysis
## When To Use
- Reviewing a debtor's disclosure statement before a §1125 adequacy hearing
- Preparing objections on behalf of creditors, equity holders, or committees
- Evaluating plan feasibility projections for an investor considering a claim purchase or plan sponsorship
- Comparing the proposed plan's recoveries against a hypothetical Chapter 7 liquidation
- Advising a client (lender, bondholder, trade creditor) on whether to vote for or against a plan
## Inputs To Gather
- **Disclosure statement** and all exhibits (financial projections, liquidation analysis, valuation reports)
- **Plan of reorganization** (or summary of plan terms if full plan is not yet filed)
- **Schedules and SOFA** (Statements of Financial Affairs) from the bankruptcy filing
- **Monthly operating reports (MORs)** for trend analysis of debtor's post-petition performance
- **Claims register** or claims summary — secured, priority, administrative, general unsecured, equity
- **Debtor's prepetition financials** (audited or unaudited 2–3 years) for baseline comparison
- **Independent valuation or appraisal reports**, if filed separately from the disclosure statement
- **Key case orders** — DIP financing, cash collateral, critical vendor, 363 sales
- **Stakeholder identity** — which constituency the analysis serves (secured lender, unsecured creditor committee, equity, potential plan sponsor)
## Workflow
1. **Assess "adequate information" under §1125(a)**
- Confirm the disclosure statement describes the plan's classification structure, treatment of each class, and means for implementation
- Check for description of the debtor's history, business operations, and reasons for filing
- Verify disclosure of insider transactions, management compensation, and related-party dealings
- Identify material omissions — missing risk factors, undisclosed litigation, or unexplained assumptions [VERIFY against local court's adequacy standards, which vary by jurisdiction]
2. **Analyze financial projections**
- Compare revenue and EBITDA assumptions against historical performance in the MORs and prepetition financials
- Stress-test key drivers: revenue growth rate, margin assumptions, capex requirements, working capital needs
- Flag hockey-stick projections — where year-1 reorganized performance sharply diverges from recent actuals without clear operational justification
- Evaluate the discount rate or multiple used for enterprise valuation; compare to comparable-company benchmarks
- Assess the debtor's projected ability to service exit financing and plan consideration payments
3. **Evaluate the liquidation analysis (§1129(a)(7) "best interests" test)**
- Confirm all material asset categories are included (real property, equipment, IP, avoidance actions, causes of action)
- Check recovery assumptions for each asset class against orderly-liquidation and forced-sale benchmarks
- Verify Chapter 7 administrative cost estimates (trustee fees at statutory rates, wind-down costs, professional fees) [VERIFY statutory trustee fee schedule under §326]
- Compare per-class recoveries under the plan to per-class recoveries in liquidation
- Identify classes where liquidation arguably yields equal or higher recovery — these are potential objection vectors
4. **Review classification and treatment**
- Map each claim type to its plan class; flag any gerrymandering (splitting similar claims into separate classes to manufacture an accepting class)
- Confirm priority claims (§507) receive required treatment under §1129(a)(9)
- Check for unfair discrimination among classes of equal rank
- Evaluate whether any impaired class is being asked to accept treatment below the liquidation floor
5. **Assess feasibility (§1129(a)(11))**
- Determine whether the reorganized debtor can meet ongoing obligations without a likely need for subsequent liquidation or further reorganization
- Review capital structure post-emergence: leverage ratios, debt service coverage, liquidity cushion
- Evaluate management and governance changes — is the same team that drove distress running the reorganized entity?
- Assess contingent liabilities (pending litigation, environmental, pension) that could undermine projected performance
6. **Identify confirmation objection grounds**
- Summarize potential §1129(a) objection bases: inadequate information, best-interests failure, unfair discrimination, lack of feasibility, bad faith
- For cram-down scenarios (§1129(b)), evaluate whether the plan satisfies "fair and equitable" and "does not discriminate unfairly" for each rejecting class
- Note any unresolved claim disputes that could shift voting outcomes
## Output
Structure the analysis as follows:
- **Executive Summary** — one-page overview of key findings, recommended position (support/object/negotiate), and critical risks
- **Adequacy of Information** — section-by-section assessment of disclosure completeness, with specific omissions flagged
- **Projection Analysis** — table comparing debtor projections to historical actuals and stress-case scenarios; highlight key sensitivities
- **Liquidation Comparison** — side-by-side recovery matrix (plan vs. Chapter 7) by class, with notes on disputed assumptions
- **Classification & Treatment Review** — class-by-class analysis with flags for gerrymandering, unfair discrimination, or priority violations
- **Feasibility Assessment** — qualitative and quantitative evaluation of post-emergence viability
- **Objection Points** — prioritized list of potential objection grounds with supporting analysis and case law references [VERIFY case law citations against current circuit authority]
- **Recommendation** — actionable next steps for the client, including negotiation leverage points
## Quality Checks
- Every material projection assumption is compared to at least one objective benchmark (historical data, industry comp, or third-party report)
- Liquidation analysis covers all asset categories disclosed in the schedules; no unexplained exclusions
- Each plan class is evaluated for both the best-interests test and feasibility
- Stakeholder-specific bias is explicit — the analysis states whose perspective it adopts
- All jurisdiction-dependent standards are marked [VERIFY] (e.g., local adequacy rules, trustee fee calculations, circuit-specific cram-down precedent)
- No unsupported legal conclusions — factual findings are separated from legal arguments
- Financial figures cross-check between the disclosure statement, the plan, and the MORs for internal consistency
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