Project Inglemoor — Chapter 11 Cleansing Materials
A 1.5-hour Chapter 11 Cleansing Materials case study with a complete model answer
Modeled After
PJT Partners
Chapter 11 cleansing materials containing no valuation of any kind: asset-level operating substitutes — net acres, percentage held by production, operating rigs, net production, proved reserves, gross drilling locations and type curves — plus the capital structure showing leverage through each tranche with market price alongside face, and an organizational chart used as a structural-priority and collateral map
Structure and exhibit set are modeled after PJT Partners. The company, the financials and every figure in this case are entirely our own.
The Situation
Inglemoor Resources, LLC
- Sector
- Upstream oil and gas — Appalachian Basin dry gas, produced from 412,000 net acres across three field areas and gathered under a long-term agreement with an affiliated midstream entity
- Size
- Geography
- United States; headquartered in Ledbury, Pennsylvania, with acreage in the Kelverstone, Marchbank and Ostrey field areas of the Appalachian Basin
- Ownership
- Situation
The Prompt
You are the financial advisor to Inglemoor Resources, LLC, working alongside restructuring counsel. Six holders of the senior unsecured notes have been restricted since February 17 under confidentiality agreements carrying a cleansing provision.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 90 minutes.
PART 1
Read the agreements and fix the deadline
PART 2
The disclosure schedule
PART 3
The two items the contract does not resolve
PART 4
The asset base, in operating units
PART 5
Capital structure and unit economics
PART 6
The organizational chart as a collateral map
PART 7
The gathering agreement
PART 8
Liquidity, and the three proposals
PART 9
Form, forum and the language the disclosure must carry
PART 10
The memorandum
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and memo are in the solution set below.
- 01
Read the agreement before you read the diligence record
- 02
Fix the date, and check whether you actually control it
- 03
Work the schedule item by item, and write the reason down
- 04
Build the substitutes, not a valuation
- 05
Print the market against the face
- 06
Say what you did not publish
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Cleansing provisions and the restricted period
A creditor who wants to negotiate with an issuer has to take material non-public information, and a creditor who takes it cannot trade. The standard bargain is a confidentiality agreement with a cleansing provision: the issuer agrees to publish the information on a stated trigger, and the holder accepts a standstill until then. The provision is what makes the negotiation possible at all, and it is a timing mechanism rather than a disclosure standard — what must be published was fixed when the information was handed over, not by anybody's later judgment about materiality.
Regulation FD and the express-confidentiality exclusion
Regulation FD applies to an issuer with a class of securities registered under section 12 or required to file reports under section 15(d) — which reaches an issuer with no listed equity whose notes were registered in an exchange offer. It prohibits selective disclosure of material non-public information, but Rule 100(b)(2)(ii) excludes a disclosure to a person who expressly agrees to keep it confidential. That exclusion is the architecture on which every restricted negotiation is built.
Furnished against filed, and Items 7.01 and 8.01
Information under Item 7.01 of Form 8-K is furnished rather than filed: it is not subject to section 18 liability and is not automatically incorporated by reference into a Securities Act registration statement. Information under Item 8.01 is filed. The distinction matters for liability exposure and for what a later registration statement carries, and it does not matter at all for Rule 10b-5, which reaches anything said either way.
The forward-looking safe harbor
Publishing a five-year plan is publishing projections. The statutory safe harbor in section 21E of the Exchange Act protects a forward-looking statement that is identified as such and accompanied by meaningful cautionary statements naming the important factors that could cause results to differ. Its exclusions — an initial public offering, a going-private transaction, a tender offer, a roll-up, a blank check company and a penny stock issuer among them — do not reach a restructuring exchange, so the protection is available if the language is actually written.
Rule 10b5-1 and the awareness standard
A purchase or sale is on the basis of material non-public information if the trader was aware of it, not if the trader used it. Awareness is why a standstill has to be drafted at all, and it is why a cleansing date is a date the whole market has an interest in rather than a private term between an issuer and a handful of holders. Until the information is public, the restricted holders are disabled and everyone trading opposite them is exposed.
Operating substitutes for valuation
In an upstream company the standard substitutes are net acres, the percentage held by production, operating rigs, net production, proved reserves in volumes, gross drilling locations and type curves expressed as recovery per lateral foot. Each is an input a reader can price for themselves. The share held by production is the substitute for a lease-expiry schedule: it says how much acreage can be held without spending anything, which is the single most useful number about an acreage position under liquidity pressure.
Minimum volume commitments and midstream dropdowns
A producer that contributes its gathering system to an affiliate and signs a long-term agreement with a minimum volume commitment converts a capital cost into a fixed operating obligation. Because it is an operating cost it is paid ahead of interest, and because the affiliate is unrestricted its lenders have no claim against the producer. The undiscounted commitment over a long term routinely exceeds the funded debt, which is why the organizational chart is a substantive exhibit rather than decoration.
Section 548 against the state look-back
A constructive fraudulent transfer claim has two clocks. Section 548 of the Bankruptcy Code reaches back two years from the petition; state Uniform Voidable Transactions Act analogues, available to a trustee through section 544, typically reach four. A transfer can therefore sit outside the federal window and inside the state one, and saying the look-back is open without saying which one is a claim that will be corrected in the room.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and memo, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Cleansing disclosure construction
- —Asset-level operating substitutes for valuation
- —Capital structure with leverage through each tranche
- —Market price against face value
- —Structural priority via the organizational chart
- —Non-disclosure cleansing mechanics
Answer Deck
Full model answer, banker-formatted
Memo
The written recommendation and how it was reached
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PowerPoint Deck and Memo (PDF) and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Inglemoor — Chapter 11 Cleansing Materials
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no valuation in a case about a distressed company's securities?
Because cleansing materials are a disclosure, not an opinion. Their purpose is to put the market in the same position as the holders who were restricted, and the restricted holders were given operating data, a capital structure, a chart and three proposals — not a view on value. Publishing a valuation would also do something the issuer has no business doing in this document: it would tell every holder what its own securities are worth at the moment those holders resume trading.
The agreement only covers information the company provided. Can I stop there?
You can, and it is the weaker answer. The literal scope leaves out the counterparty's own counterproposal, which the company received rather than gave. Publishing your two proposals and staying silent about the answer to them leaves a reader with a materially false impression of the negotiation — that one side moved and the other did not. A technically compliant disclosure that misleads is not a position worth defending, and consent to publish is usually available for the asking.
What do I do about information that belongs to somebody else?
Disclose the fact and withhold the substance, and say that you have done so. A third party's indicative terms under a separate confidentiality agreement are not yours to publish, and breaching one agreement to perform another is not a resolution. What you must not do is describe the situation in a way that implies there is nothing there — which is the version that reads as caution and is a statement.
How much of the 90 minutes goes on the materials rather than the memorandum?
Rather more than half, but the reading comes first and it is not optional. The honest split is around ten minutes on the agreements and the notice, around twenty on the disclosure schedule, and the rest divided between assembling the exhibits and drafting. Nothing here is modeled — every figure is given — so time spent recomputing something you were handed is time taken from the judgment that is being graded.
Can the company ask for more time?
It can ask, and it should understand what it is asking for before it does. The deadline is contractual, the holders have been unable to trade for weeks, and the self-help provision lets any one of them publish if the company does not. So the practical choice is not between disclosing and not disclosing; it is between a disclosure the company controls, with cautionary language and a statement of what was withheld, and one it does not.
How much securities law do I actually need?
Enough to state a small number of propositions exactly rather than a large number approximately. Regulation FD and why the confidentiality agreements were necessary; furnished against filed and what the choice does not buy; the forward-looking safe harbor and its conditions; the awareness standard under Rule 10b5-1; Bankruptcy Rule 2019 and when it attaches; and section 1125, so you can say what this document is not. Anything you cannot state cleanly should be left to counsel and flagged as such.
About This Chapter 11 Cleansing Materials Case Study
Chapter 11 Cleansing Materials case study for investment banking interviews. 90-minute format covering cleansing disclosure construction, asset-level operating substitutes for valuation, capital structure with leverage through each tranche. Includes the full prompt, a model answer deck, a written memo and an audio walkthrough.
This case study sits in Investment Banking, under Restructuring & Special Situations. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
90-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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