TEA: Volume 13 (2013)

TEA.13.0 – 2013. The Earnings Analyst 13: 85pp.

TEA.13.1 – Commercial Real Estate, Chapter 11 Bankruptcy & Cram Down Interest Rates.  Allyn Needham and Kristin Schroeder.  Commercial real estate (CRE) is an important component of the U.S. economy. The development of CRE can be a driving force for employment and investment growth. “Cram Down Interest Rate Analysis in Chapter 11 Bankruptcy Matters: An Overview” (Needham & Schroeder, The Earnings Analyst, Vol. 12, 2012) presented an overview of the bankruptcy process. This article provides additional information about Chapter 11 bankruptcies, defines CRE, discusses how it is financed and addressed by the Bankruptcy Code, and how courts have adopted the formula approach for determining the cram down interest rate for the repayment of the CRE loan. In the end, the reader will have received an introduction to the information, methods and case specific data needed for a cram down interest rate analysis in a CRE bankruptcy.

TEA.13.2 – Using Online Help-Wanted Advertising Data and Other Indicators to Assess Whether a Plaintiff’s Job Search was Sufficient to Mitigate Damages.  Malcolm S. Cohen and Laura R. Steiner.  This paper suggests using multiple labor market indicators for determining whether a plaintiff mitigated damages in a loss of employment case. The ratio of Help Wanted Ads per Employed Worker (“Ad Rate”) which compares counts of online help wanted advertisements to the number of employed persons, can be used as an indicator of the competition for available jobs in a specific occupation and geography. This measure is validated in two ways: (1) a time series regression comparing the ratio of help wanted ads per employed worker to new hires; and (2) a cross-section occupational model comparing the log of help wanted advertisements per employed worker to labor market indicators—such as the unemployment rate, change in employment, and change in wages—from prior research on labor shortages. A database containing over one billion help wanted ads, which can be accessed for use in mitigation analysis, is described. Case studies are presented to demonstrate the application of this approach.

TEA.13.3Negative Net Discount Rates: When Are they Appropriate, and How to Ensure Consistency When Derived from Current Market Yields and Less-Current Earnings Growth Forecasts.  Joseph I. Rosenberg.  Today’s current bond market yields remain very low by historical standards. This has caused many damage award experts to either use negative net discount rates (NDR) or consider when to use them when calculating awards. The purpose of this paper is fourfold: (1) Review the literature on key issues and historical trends involving NDRs; (2) rather than viewing NDR as an input to calculating an award, argue instead that NDR should be considered an effective result when calculating an award using current market yields and forecasted earnings growth; (3) compare alternatively-derived NDRs to see under what conditions a negative NDR should result; and (4) offer a way to resolve the timing mismatch in calculating a damage award and its implied NDR based on current market yields and a “stale-dated” forecast of earnings growth.

TEA.13.4Methodological Considerations for Proper Life Care Plan Valuation.  Gene A. Trevino.    In catastrophic injury cases the injured party will often have extensive medical and support needs that are detailed with associated costs in a Life Care Plan. For the purposes of litigation, this stream of future costs is usually calculated to present value by a pecuniary damages expert. Four important elements of this present value process are examined in this article with suggested methodological considerations to help insure that the determined present value will provide sufficient funds to cover the projected costs in the Life Care Plan. The four elements to be examined and discussed are: medical price growth indexes, interest rates, securities, and structured settlements.

TEA.13.5Origins of the Theory of Economic Damages.  Rob Schlegel and Kathy Hensley.   A perspective on the work.