======Receivership======
Receivership is a legal process where a financially troubled company is placed under the control of an independent, court-appointed person known as a 'receiver'. This usually happens at the request of a [[secured creditor]]—a lender, like a bank, that holds a specific claim over some of the company's property (e.g., via a [[mortgage]] or a floating charge). The receiver's primary job isn't to save the company or help its shareholders. Instead, their duty is to the secured creditor who appointed them. The receiver takes control of the relevant [[asset]](s), manages them, and usually sells them off to generate cash. This cash is then used to pay back the debt owed to that secured creditor. While the company might technically continue to operate, receivership is a clear signal that it cannot meet its obligations, and the focus shifts from running a business to liquidating assets for a specific lender's benefit.
===== The Receiver's Mission: A Tale of Two Loyalties =====
Think of a receiver as a champion hired by a specific creditor. While they must act professionally and within the law, their main loyalty is to the party that got them appointed. Their goal is simple and focused: recover the money owed.
This contrasts sharply with other insolvency processes like [[bankruptcy]] or [[administration]], where the appointed official (a trustee or administrator) has a broader duty to //all// stakeholders, including other creditors, employees, and sometimes even shareholders. The receiver's mission is much narrower. They might:
  * Take control of the specific asset(s) securing the loan, such as a factory, a patent portfolio, or accounts receivable.
  * Manage these assets to maximize their selling price. This could involve temporarily running that part of the business.
  * Sell the assets and use the proceeds to pay off the secured creditor's loan, plus their own fees.
If, by some miracle, there's money left over after the secured creditor is fully paid, it goes back to the company. However, in most cases, there isn't much, if anything, left for other creditors or shareholders.
===== Receivership vs. The Rest: A Quick Guide =====
It's easy to lump all corporate failures together, but for an investor, the differences are critical. Here’s a simple breakdown of receivership compared to a more comprehensive restructuring like a [[Chapter 11]] bankruptcy in the U.S. or administration in the U.K.
==== Key Differences ====
  * **Who's in Charge?**
    - //Receivership:// Initiated by a **secured creditor** to protect their specific loan.
    - //Bankruptcy/Administration:// Often initiated by the **company itself** or a group of creditors to attempt a full-scale rescue and restructuring.
  * **What's the Goal?**
    - //Receivership:// **Sell specific assets** to repay a single secured creditor. It's a targeted debt collection process.
    - //Bankruptcy/Administration:// **Reorganize the entire business** to make it viable again. The goal is survival and creating a fair repayment plan for //all// creditors.
  * **Who Gets Paid?**
    - //Receivership:// The secured creditor who appointed the receiver gets **first priority** from the sale of their secured assets. Everyone else waits.
    - //Bankruptcy/Administration:// A structured hierarchy of payments is established, but the process is designed to create a more equitable outcome for a wider range of stakeholders.
===== A Value Investor's Perspective on Receivership =====
For a [[value investor]], news of a receivership is a moment of both extreme danger and, occasionally, hidden opportunity.
==== For Shareholders: A Red Alert ====
If a company you own [[equity]] in enters receivership, it's almost always game over. Your shares are likely heading to zero. Why? Because shareholders are last in line to get paid. The receiver’s job is to pay the secured creditor. After that come other creditors, and only then, if anything is left (which is rare), do shareholders get a look in. Don't be tempted by the rock-bottom stock price; you are buying a claim on a company whose most valuable assets are being sold off for someone else's benefit.
==== For Aspiring Vultures: The Asset Play ====
The real value, as [[Benjamin Graham]] might appreciate, is in the assets themselves. A company entering receivership may be forced to sell high-quality assets at fire-sale prices. This is not an opportunity for a stock picker but for another company or a [[private equity]] fund. They can swoop in and buy valuable machinery, real estate, or intellectual property for pennies on the dollar from the receiver. This is the ultimate "cigar butt" investment—finding a valuable asset discarded by others.
==== For Creditors: A Tale of Two Tiers ====
If you are a [[bondholder]], your fate depends entirely on your status.
  * **Secured Bondholders:** You are the creditor who likely initiated the receivership. This process is your legal mechanism for getting your money back.
  * **Unsecured Bondholders:** You are in a much tougher spot. You must wait behind the secured creditors and have a lower chance of a full recovery. Your best hope is often a broader restructuring (like Chapter 11) rather than a narrow receivership.