6 questions with bankruptcy lawyer Kevin Neiman on COVID-19 preparations

As coronavirus swiftly changes the way we work and live, businesses are attempting to prepare and understand the effects the pandemic is having on our economy.

ColoradoBiz talked to Kevin Neiman, the principal and founder of Law Offices of Kevin S. Neiman, pc, get his perspective on what the short- and long-term economic impacts of the virus will be on the state; how businesses and specific industries can protect themselves from bankruptcy; and what these companies can do right now to protect their long-term profit.

Neiman practices bankruptcy and insolvency law in Denver, working with business entities and people on financial problems and commercial disputes, primarily representing them in Chapter 11 bankruptcy reorganizations, Chapter 7 bankruptcy liquidations and workouts.

ColoradoBiz: What economic impact do you expect to see in Colorado in the short-term and long-term?

Kevin Neiman: Businesses and livelihoods are being dramatically altered because of the coronavirus (COVID-19) as the economic effects of this pandemic ripple around the world, including in Colorado. Restaurants and bars have been shuttered or have scaled back. Sporting and cultural events and travel have been canceled. Oil prices have collapsed. The stock market is meaningfully down from its high and volatility continues. People are drastically cutting back on discretionary spending, spending only on essentials and otherwise conserving resources to plan for what may come. Small businesses are going to bear the brunt of this pain as well as their employees who are being terminated or furloughed to varying degrees.

Many companies and people are going to lose a lot of money during this crisis. Some companies are going to disappear. Unfortunately, the distress ripples through the economy and the full magnitude of effects will not be known for some time.

While no one can reliably predict the duration or the outcome of this outbreak, its economic effects are unprecedented, at least in recent history. We may see the strongest impacts on the economy over the next four to six months, and I remain hopeful that they will not be lastingly prolonged in Colorado.

CB: What would be the effects of a resulting economic crisis?

KN: The extent of an economic crisis will depend on the steps authorities take to contain the coronavirus, how people (hopefully reasonably) respond, and how quickly the virus can otherwise be contained. The best chance at limiting the economic fallout from the epidemic’s impact may come from coherent, coordinated and credible leadership and policy responses, including invoking measures that will hopefully return society to some normalcy.

In turns of effects, with businesses closing and people losing the ability to earn wages and thus pay bills, it is very likely that the country will be in a recession for some period of time. While government spending and benefits can help offset the effect of this, I expect a period of wide-spread economic hardship.

CB: How can businesses protect themselves from possible bankruptcy?

KN: There will likely be a wave of bankruptcies and insolvency proceedings, and businesses that are not providing core goods and services will have a difficult time fully avoiding the adverse consequences. In the interim, possible actions to mitigate these effects include conserving all resources to the extent possible, reviewing all contracts, agreements and insurance policies to understand all rights and liabilities that they may have, and communicating with partners to negotiate matters that could ease up at least the immediate pressure (if not hopefully longer).

CB: Is there specific advice you would give to industries that are most impacted by the virus? 

KN: These industries have been significantly affected by current events, but their loss of business will reverberate through the business community. For example, a hotel’s suppliers will all likely feel the effects of occupancy rates tumbling, as well as its employees who are losing their jobs. Whether businesses in these industries can avoid bankruptcy may largely depend on how accommodating their landlords, lenders, suppliers and other creditors will be with them.

At this time, perhaps the fastest, cheapest and easiest path is for any such businesses to approach their creditors first, directly, and ask for help if needed. There is a risk that any such creditors could respond by taking adverse action that could further exasperate the current problems by, for example, commencing legal action that otherwise wouldn’t have been taken; so, each situation needs to be independently evaluated.

CB: What options do businesses have today to protect their long-term profit? 

KN: This question really requires a complex analysis and varies depending on each situation, but I recommend the McKinsey & Company analysis on the coronavirus implications for business. It outlines several actions that can help businesses of all kinds, including protecting the employees, setting up a cross-functional COVID-19 response team, ensuring there is sufficient liquidity, stabilizing the supply chain and staying close to customers and communities.

CB: Is there any other advice you want to offer? 

KN: I very much hope this is a simple blip on the economic radar and a few months from now, the economy will be recovering, people will be healthy and things will return to normal.  For now, though, with an uncertain future, it is critical not to become a passive victim of the coronavirus pandemic. Try to get in front of the problem. Take an honest assessment of your finances and operations, identify strengths and weaknesses and develop a flexible plan to take advantage of and bolster your strengths while mitigating and improving your weaknesses.