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.