Target company recently underwent Article 9 restructure. Is this a red flag?

July 30, 2025
by a searcher in Chicago, IL, USA
The company I’m evaluating went through an Article 9 restructuring last year. My understanding is that this means the lender seized the company’s assets after a default and sold them back to the same owner under a new legal entity. According to the broker, Article 9 allows the business to keep running free of old debts.
For context, when calculating SDE, they add back $200K–$400K of interest expense (SDE is approx. $400K on $1M revenue), supposedly because the owner borrowed from high-interest lenders for personal expenses.
Does an Article 9 restructuring always raise red flags? I would appreciate any feedback on extra diligence steps or hidden risks to watch out for after this kind of asset sale.
from University of Wisconsin in Minneapolis, MN, USA
from University of Missouri in Denver, CO, USA