Ability-to-pay issues typically arise in government investigations of antitrust violations, most often price fixing, where, under the U.S. Sentencing Guidelines, a court may reduce a fine if it finds that the organization is not able, even on a reasonable installment schedule, to pay the minimum fine without substantially jeopardizing its continued viability. The key question is whether a proposed fine threatens the company's continued viability and, if so, the maximum fine the company can bear while remaining a viable competitor.
We have the expertise and experience to conduct ability-to-pay analyses from the investigation stage through any plea or court approval. We analyze the company's historical and projected profitability, liquidity, and creditworthiness, together with the relevant industry and macroeconomic conditions. We conduct various analyses such as solvency tests (Balance Sheet Test, the Cash Flow Test, the Capital Adequacy Test), analysis of bankruptcy-prediction and credit-rating models, an analysis of debt covenants and the risk of technical insolvency, and an assessment of the company's ability to raise or refinance capital. Our work is based on widely-accepted and standard methodologies, frameworks, and analyses and we have been engaged by both plaintiffs and defendants in a wide range of industries in such matters.