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?
An empirical study from New York University Professor Edward Altman concludes that 15% to 18% of reorganized Chapter 11 debtors revisit bankruptcy (sometimes more than once). According to the study, some of the main causes of recidivism are too much leverage and flawed Chapter 11 plan feasibility assessments based on overly optimistic projections. The study concludes that, in a significant number of Chapter 11 cases, a plan of reorganization should never have been confirmed because the debtors had little or no prospect of  succeeding after bankruptcy and were, therefore, quite likely to file for bankruptcy again.



Posted 5 weeks 5 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
Toward the end of the last decade, New York University Professor Edward Altman published several well-researched articles that observed that nearly one-third of firms emerging from Chapter 11 as a publicly registered company experience some form of subsequent distressed restructuring again, including the filing of a second or third bankruptcy case.
Professor Altman’s research found that serial bankruptcy filers had a significantly worse financial profile than the average sample of reorganized companies—whether measured in terms of corporate liquidity, solvency, profitability or leverage. Moreover, he predicted that serial filings would likely increase in the context of the increased predilection of investors and other stakeholders to focus Chapter 11 activity and reorganization plans on financial re-engineering, as opposed to operational performance improvement, of the distressed business.



Posted 5 weeks 5 days ago

 

Protesters gather at the start of Detroit’s bankruptcy trial in September.
Getty Images

A federal judge is set to decide Friday whether Michigan’s largest city—an industrial icon that turned into a symbol of urban decay—is ready to exit bankruptcy protection and begin to handle its own financial affairs. Read The Wall Street Journal story.
A bankruptcy judge will allow Atlantic City, N.J., to collect as much as $30 million in unpaid property taxes owed by the shuttered Revel Casino Hotel so long as the city agrees not to impose costly penalties, Daily Bankruptcy Review reports via WSJ.



Posted 5 weeks 5 days ago

Former Navy SEAL and author of the book “American Sniper”, Chris Kyle poses in Midlothian, Texas, in 2012, less than a yer before his death.
Associated Press

Hedge fund manager J. Kyle Bass never thought his friendship with American Sniper Chris Kyle would lead to a nasty legal battle with Mr. Kyle’s widow nearly three years after the former Navy SEAL was killed on a Texas gun range.
Mr. Bass became close friends with Mr. Kyle, who claimed to be the deadliest sniper in U.S. military history, and helped him open a law enforcement-training business after he left the military. But his effort to help Mr. Kyle has ended badly: the business is bankrupt, a host of A-list investors are out of the money and Mr. Kyle’s widow, Taya, is accusing the top lawyer at Mr. Bass’s firm of trying to trick the family with bad legal advice.



Posted 5 weeks 5 days ago

Texas entrepreneur Sam Wyly arrives at federal court in New York in May for closing arguments his civil trial.
Associated Press

The team of writers behind former billionaire Samuel Wyly’s book projects have been let go after a bankruptcy judge warned the Texas entrepreneur that he can’t have both his luxuries and bankruptcy protection.
“The book projects have been temporarily suspended,” according to a new budget that cut out the $32,000 monthly cost of two personal writing assistants.
Mr. Wyly has previously written books on entrepreneurship and had planned to continue writing even after he filed for bankruptcy last month, unable to afford to pay the U.S. Securities and Exchange Commission a nearly $200 million judgment for securities fraud.



Posted 5 weeks 6 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
A recurring discussion among bankruptcy professionals and the public alike relates to the phenomenon of serial filers: Chapter 11 debtors who emerge from bankruptcy protection and later find themselves back on the courthouse steps again. This discussion arises when a high-profile, former debtor seeks bankruptcy protection a second or third time, as Trump Entertainment did recently. Almost immediately, observers ask, who is responsible for this supposed abuse of the judicial process? But before trying to ascribe blame (and there is plenty to be shared), the first question should be: Does anyone actually deserve blame?



Posted 5 weeks 6 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
Before a bankruptcy court can confirm a Chapter 11 plan of reorganization, it must find that confirmation of the plan isn’t likely to be followed by the need for further financial reorganization. This requirement is often referred to as the feasibility test. Despite the feasibility requirement, repeat Chapter 11 filings—so-called Chapter 22 and even Chapter 33 bankruptcy cases—are increasingly common.
Three factors seem to pervade the recent repeat filings, encouraging companies to speed through a balance-sheet restructuring or sale process without truly addressing operational problems: cheap money, recent Bankruptcy Code amendments and the rising cost of Chapter 11.



Posted 5 weeks 6 days ago

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?
Repeat Chapter 11 filings are not uncommon. The reasons behind these events are almost as diverse as the companies themselves. Flawed capital structures, declining industries, economic downturns and product issues are just some of the issues that bring these companies back to the Chapter 11 process. And, yes sometimes repeat bankruptcies also emanate from bad decisions or broken business plans on the part of management teams and boards. There’s usually no shortage of responsibility or blame to go around. Repeat Chapter 11s are part of our capitalist economy and competitive environment. Some companies will fail more than once, often for very different reasons.



Posted 5 weeks 6 days ago

Trump Entertainment

As cash quickly runs out to keep Atlantic City’s Trump Taj Mahal Casino Resort open, a bankruptcy judge refused to sign off on the outlines of a bankruptcy-exit plan for owner Trump Entertainment Resorts Inc ., telling the casino operator to come back next week with a firmer vision for the casino’s future. Read the story in the Daily Bankruptcy Review.
(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 5 weeks 6 days ago

Calpers headquarters in Sacramento, Calif.
REUTERS

I’ve been writing a bunch over the past week about how the bankruptcies of Stockton, Calif. and Detroit are creating precedents that upset the traditional repayment pecking order(bondholders first, then retirees) by weakening bondholder claims and giving higher standing to pension funds. Today Moody’s Investors Service is out with a report calling a judge’s recent confirmation of Stockton’s bankruptcy-exit plan “credit positive” for the California Public Employees Retirement System (CalPERS) “because it likely sets a precedent that pensions will enjoy better treatment than debt in California Chapter 9 cases.”



Posted 6 weeks 7 hours ago