What is the open accounts payable balance for the debtors' largest trade vendor? How many employees were on the payroll at the petition date? What is a reasonable adequate assurance amount for the debtors' retail utility providers? What deliveries did the debtors' largest reclamation vendor make over the past three months? How can the debtors collect documents and electronic data responsive to government investigations or discovery requests in litigation? Bankruptcy professionals tasked with administering and resolving claims face these questions on a daily basis. To respond accurately and timely, these professionals need to have a mastery of the debtors' information assets.

Any bankruptcy professional who has guided a debtor through a restructuring or asset sale understands the importance of obtaining accurate, comprehensive and timely information. The success of all aspects of the case—from creation of the creditor matrix and bankruptcy schedules to development of the plan and ultimate distribution to creditors—depends on the quality of information provided to debtors' management, financial advisors and other parties involved in the restructuring.

In addition, many of today's cases involve complex litigation and regulatory/government investigations that add further information requirements. Not only could the lack of effective information management hamper the case's progress and limit professionals' effectiveness, but it could mislead parties involved in the restructuring and prove disastrous to the outcome of the case.

This article focuses on the five major steps in ensuring an effective and successful information management plan: (1) Determining Information Requirements, (2) Identifying Information Sources, (3) Assessing and Ensuring the Debtors' Ability to Support Data Needs, (4) Preserving Information and (5) Centralizing Information Management and Communication.

Determining Information Requirements

Bankruptcy claims professionals must first develop a comprehensive checklist of all information needs. This includes all standard bankruptcy filings such as building schedules and creating Statements of Financial Affairs. In addition, specific litigation and/or investigations may have unique information needs. Although the exact types of information required in each bankruptcy case depend on the debtors' industry, the type of restructuring and the debtors' specific situation, many information needs are common across all bankruptcies. The following highlights the most common information needs and establishes the base of an Information Requirements Checklist:

Schedules and Statement of Financial Affairs: The debtors' general ledger system will form the basis for most of the schedules. Professionals should pay particular attention to the accounts payable subledger for Schedule E (unsecured priority claims) and Schedule F (general unsecured claims). The accounts payable subledger also provides the majority of transactions for the Statement of Financial Affairs. Significant payments are found within treasury systems as well as payroll systems (particularly for insider payments). For debtors with multiple general ledgers that are consolidated using data warehousing packages, it is critical to identify all of the data feeds into the data warehouse in order to completely catalog the feeder systems. During development of this inventory list, bankruptcy professionals should design and implement individual collection plans for each feeder system.

Creditor Matrix: To properly notice all potential creditors, professionals must interrogate a variety of systems to create the creditor matrix. Obvious systems include accounts payable vendor masters and payroll masters. Other primary systems of interest should include accounts receivable customer masters that may show customers maintaining credit balances. Similar to the data-collection efforts for the bankruptcy schedules and statements of financial affairs, professionals must understand the universe of accounts payable, payroll and accounts receivable systems to ensure complete coverage.

Preference, Reclamation, Trade and Other Claims: Because general claims administration requires the same information as the data used to create schedules and statements, development of accurate schedules and statements is critical to the claims process. The information collected for the schedules provides initial claim balances.

Other claims such as reclamation claims will require professionals to extract additional information not found in the schedules and statements. Proper valuation of reclamation claims require delivery or goods-received dates and goods-sold dates that usually reside in the inventory management systems. If the inventory management system tracks inventory at a granular level (i.e., by lot number), professionals can uncover the arrival date of goods creditors are attempting to reclaim. Alternatively, if the inventory management system tracks inventory balances by SKU, the reclamation analysis must use daily balances to perform the analysis.

Litigation Claims and Regulatory/ Governmental Investigations: Although not directly related to claims administration, the obligation to preserve data falls on debtors when they reasonably anticipate litigation or a regulatory investigation. Because the bankruptcy claims professional often becomes the de facto information-management point person, bankruptcy professionals must understand the responsibilities that accompany this role. The duty to preserve imposes a significant responsibility upon the debtors and its restructuring professionals to maintain records (both paper and electronic). To ensure that debtors perform this duty, bankruptcy professionals not only must ensure that current production systems are protected from alteration, but also ensure that the debtors' archives are protected. This requires a thorough understanding of the debtors' backup policies and procedures, including understanding the inventory of archives. If no backup or preservation policies and procedures exist or existing policies are inconsistent with the recent changes to the Federal Rules of Civil Procedure, the debtor should consider adopting policies and instituting a "litigation readiness" program during the bankruptcy that will stay with the debtors post-confirmation. These preservation requirements expand the scope of interest from the financial and operational systems of the debtors to e-mail systems, file server systems, as well as laptop and desktop computers. These additional information sources are more fully described in the following section.

Identifying Information Sources

For each item listed in the Information Requirements Checklist, the debtor must identify all information sources required to address the information need fully. Bankruptcy professionals can develop a matrix detailing each information need and all corresponding information sources to organize and prioritize data sources. This matrix will allow professionals to see where information sources overlap and help evaluate each sources' criticality. The following descriptions outline the most common and critical information sources in bankruptcies:

Financial Accounting System(s): The primary source of information for many bankruptcy administration and claims resolution issues facing the debtors can be found in the debtor's financial accounting systems. These systems contain many important modules such as the general ledger, accounts receivable, accounts payable, fixed assets and treasury. Some of the most common accounting systems used by large companies include PeopleSoft, SAP and JD Edwards. Debtors may use a single accounting system or employ multiple financial accounting systems.

E-mail: As the use of e-mail has spread to all corners of business and personal communication, their importance has also increased. E-mail has become a very useful tool, especially as debtors lose key employees, in confirming information related to resolving many bankruptcy issues including claims reconciliations. Bankruptcy claims professionals who have assumed the role of information manager must understand the duty to preserve this information in the event of a pending lawsuit or investigation. To comply with this requirement and properly execute preservation plans, professionals must identify all sources of e-mails. The following are three common sources of e-mails to consider in your examination:

• Production E-mail Servers: In large corporations, e-mail typically resides on one or more corporate e-mail servers. Microsoft Exchange and Lotus Notes are the most common e-mail servers used by large corporations. These servers contain e-mail currently existing in users' e-mail boxes. If an individual deletes or archives his e-mail off the e-mail server, the IT group will generally not be able to produce the message from the e-mail server.
• User-Archived E-mails: A company's IT group or individual users may archive e-mail from the production e-mail server to an offline file. These offline files reduce the production e-mail servers' space requirements while maintaining users' access to the e-mail. Professionals should search for archived e-mail on the debtors' file servers or the individuals' computers.
• E-mail Repository: Some companies subscribe to e-mail archiving services provided by third-party vendors. These third-party vendors set up off-site servers that collect all e-mail traffic coming into and out of a company's e-mail servers. Even if an individual user deletes or archives an e-mail from his mailbox, the e-mail repository would retain a copy of the deleted e-mail. If the debtor subscribes to these servers, these e-mail repositories are key in ensuring all e-mails are produced.

File Server: Companies typically maintain file server space for employees to save business files. File servers are usually organized into at least two groups: "home drives" and "group shares." Each employee should have access to at least one "home drive" or personal file folder where only that specific employee has access to that folder. IT will typically organize "group shares" by functional group such as accounting, finance, treasury, human resources, etc. All employees in a specific functional group would have access to that group's shared file folders. To locate critical files, professionals should interview the IT director to understand how the debtors' file servers are structured and organized.

Desktop Computers and Laptop Computers: Employees often utilize the hard drives in their laptop or desktop computers to save business files. Special programs can inventory all files on users' hard drives. In special cases of fraud, professionals may decide to forensically image certain individuals' computers to ensure preservation of all files.

Backup Tapes: To safeguard systems and data, corporate IT groups routinely archive critical systems to backup tapes. These backup tapes allow professionals to reach back in time to a specific period in question. Professionals building the information-management plan should interview the director of IT and understand when backup tapes are created (daily, weekly, monthly, etc.), when backup tapes are recycled and if the IT group maintains an inventory of available backup tapes.

Assessing the Debtors' Ability to Support Information Needs

A number of factors may strain the debtors' ability to support the estate's information needs. Restructuring professionals must examine these factors and determine whether the debtors' current staff can respond to the estate's information needs or whether additional support is needed. The following are some factors to consider and suggested solutions:

Availability of operational and technical personnel: During a restructuring or asset sale, enormous conflicting interests bombard the debtor's staff. In addition to traditional responsibilities, demands on the debtor's staff increases to include supporting bankruptcy administration. At the same time, debtors may lose a substantial number of key employees due to headcount reductions and voluntary attrition. It is critical to ensure that operational personnel who understand the business information and the technical personnel who can assist in extracting the data from systems are available.

In the best-case situation, enough of the debtor's staff remains with the debtor and bankruptcy claims professionals can rely on this team to support information requests. In the worst-case situation, where a majority or all of the staff has left the company, additional professionals or outside consultants will need to be engaged to fill operational and technical gaps.

Multiple systems disbursed across many geographic locations: Companies that have historically grown through mergers and acquisitions may have many different systems performing essentially the same function. Additionally, operations may be disbursed across multiple geographic locations with disparate systems that need to be consolidated. For example, each of a debtor's manufacturing plants or business units may use different manufacturing and financial accounting systems. In this situation, it is critical to inventory all relevant systems to ensure that the debtor and its bankruptcy professionals produce analyses that are complete and accurate.

Limited access to data systems due to asset sale or liquidation: A purchaser may acquire the debtors' financial records and data systems in asset sale situations. Without appropriate planning safeguards, the purchaser may destroy critical information or withhold access to information necessary to administer the estate. Bankruptcy claims professionals must ensure the parties execute a transition services agreement that provides for an adequate time period allowing the debtor to identify all relevant data and execute plans to duplicate and preserve the data.

Preserving Information

Completion of the previous three information management steps provides the necessary information to create specific preservation plans for each of the information sources and to address specific information issues. The general preservation plans described below should provide ideas when you formulate your preservation plans:

Maintaining information in its current format or environment: Ideally, the debtor is able to maintain the information in its current format and professionals will not need to execute any preservation plans. The debtor may select this option if all of the following are true: (1) the debtor maintains ownership of the system, (2) sufficient support staff exists to maintain the system and (3) licenses and support fees are not cost prohibitive to the estate. The quality of information disseminated throughout the debtor's bankruptcy proceedings is directly related to the equitable resolution of creditors' claims.

Aggregating disparate data into a central system: When dealing with disparate systems across multiple locations, professionals may find it unrealistic to maintain the debtor's systems as they existed in their pre-filing environment. One solution is aggregating all relevant data into a data warehouse that can be accessed by the debtor and its bankruptcy professionals. This requires the design and implementation of a comprehensive data-migration plan. This plan will typically identify all repositories of data needed for the proper administration of the bankruptcy and develop a controlled migration to a data warehouse.

Third-party information hosting: An alternative to maintaining the information systems environment at the debtor's location is to contract with a service bureau. Service bureaus can provide a host of different environments for the debtors' data to reside. This alleviates the need for a knowledgeable technical support staff, but still requires an orderly data migration plan.

Archiving data to backup tapes: When dealing with less-critical information sources with a low probability the data will be required for bankruptcy administration purposes, the debtor may elect to archive the data to backup tapes. This is a prudent choice for any system that does not warrant immediate access but should be available if any future use is required.

Centralizing Information Management and Communication

In many cases, bankruptcy claims professionals may not know where to obtain information. In addition, the information used by bankruptcy claims professionals working on various aspects of a case may overlap or multiple versions of the data could exist. To ensure all professionals working on the engagement use the appropriate information and understand what information is available to them, a specific person or group should be assigned responsibility for disseminating information.

Even if there is minimal attrition of key IT professionals and end users, it is wise for the debtor's bankruptcy professionals to gain a good understanding of how the debtor's information systems operate. The creation of a bankruptcy information liaison alleviates the burdens of the debtor's employees who need to carry out their normal daily operational duties. Additionally, the liaison's understanding of both the information assets of the debtors and the informational requirements that accompany bankruptcy proceedings allow for the centralization of data requests and the streamlining of responses.

Conclusion

The quality of information disseminated throughout the debtor's bankruptcy proceedings is directly related to the equitable resolution of creditors' claims. The most important aspect of assuring that the quality of this information is optimized relies upon obtaining accurate, comprehensive and timely information. The five steps described in this article are the structure upon which achieving this goal can be obtained.