Out-of-court corporate reorganizations, or “corporate workouts,” allow dispersed investors with differing interests to coalesce and strike deals to successfully reorganize distressed companies. Corporate workouts, however, suffer from a host of well-known problems, creating “process fragility.” Current bargaining dynamics limit the instances in which corporate workouts can be used, narrow the kinds of deals that can be made, and invite opportunistic and other socially costly behavior. Yet the Artificial Intelligence (AI) revolution is here; how can it help parties navigate corporate workouts?
In this Article, we argue that AI is well situated to help increase the efficiency of corporate workouts. Based on previous work on the use of AI in negotiations, we envision a “Corporate Restructuring Machine” (CRM). This is a private, online, AI-enhanced platform companies and their stakeholders would be able to join at different times, for different services, and at different prices. The CRM would come armed with restructuring-specific problem-solving and process-management tools. These would be designed to improve decision-making in workouts, mitigate workouts’ fragile process, and incentivize more inclusive (and less socially costly) corporate restructurings. We further predict that, when combined with other innovations like “self-driving contracts,” corporate workouts will not occur at discrete moments in time but rather be a process of constant coordinated renegotiations between a company and its contractual counterparties. We discuss the profound implications of the CRM’s evolution on bankruptcy practice, corporate finance, and corporate governance.