All items from WSJ.com: Bankruptcy Beat

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
Although the U.S. bankruptcy system is designed ideally to “fix” struggling companies, Chapter 11 is not a panacea, nor does the process ensure prolonged health when the companies emerge. A growing number of companies have filed multiple times and commenced Chapter 22s (or even Chapter 33s or 44s). While there are numerous explanations that could shed light on why some organizations repeatedly seek bankruptcy protection, companies should consider how much of the blame lies with themselves.



Posted 3 weeks 3 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
Bankruptcy recidivism has a bad name. The best data points to one out of six restructured companies refiling for bankruptcy not long after getting a Chapter 11 plan of reorganization confirmed. If blame needs to be handed out, one could point to the judge who is charged under the Code with independently concluding that the plan is not likely to lead to a further restructuring of the company.  But blaming the judge would be harsh, because the statutory standard of ‘not likely’ doesn’t require a “guarantee,” just a likelihood. The data suggests that most—more than 80%—don’t refile.
One could also blame the creditors who kept too much debt in the plan for the firm because some creditors aren’t set up to take an ownership interest, or because bargaining in bankruptcy makes a deal easier by keeping more of the old debt in place. And tax rules incentivize reorganizing companies to keep more debt than is often operationally best.



Posted 3 weeks 3 days ago

Dish Network Corp. Chairman Charlie Ergen would receive a controlling stake in troubled wireless company LightSquared under the company’s newest restructuring plan, announced in court on Monday. Read the Daily Bankruptcy Review story in The Wall Street Journal.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
Communications infrastructure provider UniTek Global Services Inc. filed for Chapter 11 bankruptcy protection Monday after reaching a restructuring deal with its lenders. Read the DBR story via The Journal.



Posted 3 weeks 3 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
As is true of a company’s initial Chapter 11 filing, various factors can trigger subsequent filings. Some repeat filings are driven by broader market trends, while others are more closely tied to the circumstances surrounding the original restructuring.
A troubled company may initially file with the belief that a broad industry decline has bottomed out and that its reorganization will position the business to thrive in a market rebound. However, in some industries—gaming may be a current example—the broader industry continues to decline following the debtors’ emergence (or a subsequent downdraft hits), rendering it nonviable once again.



Posted 3 weeks 4 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
It is said that success has many fathers and failure is an orphan. Many investors in distressed debt and securities use their leverage in restructurings and Chapter 11 cases to pursue the aim of capitalism, i.e., to quickly make money. By acquiring substantial debt of distressed entities, such investors are able to control the administration and plan formulation under Chapter 11.
A primary objective of such investors is expedition—a fast confirmation of a Chapter 11 plan and the receipt of the Chapter 11 consideration in the form of cash or securities. As a consequence, there is not, in most cases, a rehabilitation of the underlying business but, usually, a limited financial restructuring with some deleveraging, substantial administrative expenses and a light approach to the feasibility under the Bankruptcy Code.



Posted 3 weeks 4 days ago

This week, the Examiners will take on a not-infrequent occurrence in the restructuring world: the filing of so-called Chapter 22s, or companies that seek Chapter 11 protection a second time.
Chapter 11 gives companies the breathing room and the tools to make such survival-strengthening changes as reducing their debts, getting out of unwieldy contracts or finding a buyer to take over operations. To exit Chapter 11, a bankruptcy judge must find that the restructuring plan a company negotiated with its creditors is, among other things, feasible and in creditors’ best interests.



Posted 3 weeks 4 days ago

John Spinello sits in front of merchandise from the game “Operation” at his Bloomingdale, Ill. home on Friday.
Carrie Antlfinger/Associated Press

The U.S. unit of Australia’s Marion Energy Ltd., which explores for natural gas in Utah, filed for Chapter 11 bankruptcy protection on Friday. The Wall Street Journal has the Daily Bankruptcy Review article here.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)



Posted 3 weeks 4 days ago

This week on The Broke and the Beautiful, 38 Studios’ bankruptcy trustee reached an important settlement, and Girls Gone Wild’s Hottest Girl in America 2010 is getting an overdue payment. Also, a Formula One racing team filed for bankruptcy.



Posted 4 weeks 15 min ago

Detroit could get a ticket to get out of bankruptcy next Friday.
U.S. Bankruptcy Judge Steven Rhodes will reveal his decision on whether the city’s bankruptcy-exit plan, which cuts $7 billion in debt, is fair.
City leaders and creditors picked through the details of the plan during a trial that lasted several weeks. The plan calls for $275 million in new borrowing and a $1.7 billion reinvestment in removing blighted buildings and boosting police and fire services in the city.
With Judge Rhodes’s approval, city leaders say Detroit could be out of bankruptcy court as soon as Thanksgiving, bringing to close the largest municipal bankruptcy in U.S. history. The 680,000-resident city filed for bankruptcy on July 18, 2013, to try to negotiate cuts to $18 billion in debt, blaming tax revenue that fell after the real-estate crash and the city’s population decline.
Throughout the case, Detroit leaders fought pressure from some Wall Street creditors and others to sell the city’s valuable art collection to repay a greater portion of the city’s debt. Federal mediators helped negotiate a deal to use more than $800 million from private foundations and the state of Michigan to avoid that sale and make the cuts to city’s worker pensions less severe.
Some individual objectors are still challenging the reorganization plan, arguing in part that the city’s emergency manager acted improperly in cutting any benefits to pensioners.



Posted 4 weeks 3 hours ago

Approximately 100 shoppers lined up outside the Borders store in Brea, Calif., to take advantage of going out of business sale prices on July 24, 2011.
Associated Press

It’s been three years since the last Borders store closed its doors, but that hasn’t stopped a group of jilted gift-card holders from continuing to fight for their unredeemed vouchers to be turned into cash.
Wednesday, the group faced its latest setback when the Second U.S. Circuit Court of Appeals sided with two lower courts and ruled that the former customers waited too long to raise their claims for the unused gift cards.



Posted 4 weeks 4 hours ago