Tuesday, July 21, 2009


Ah, Chapter 11 bankruptcy, it came into existence in its present form (with some amendments) in 1979. At first it was used largely by retailers and then by the wave of the late 1980's broken LBO's (leveraged buyouts). By the early 1990's, Chapter 11 began to be used to obtain financing (Debtor-in-Possession financing) when financing was otherwise not available.

In 2009, Chapter 11 bankruptcy has been used in ways no one could have anticipated 30 years ago. Al Lewis has an entertaining article on how Chapter 11 is being used. In the Madoff matter, it used to find and recover funds. The Government used it to ram through sales of the assets of Chrysler and General Motors (whatever happened to a plan of reorganization?). Sam Zell, aka "The Grave Dancer", may use it to sell the Chicago Cubs. In the Phoenix Coyotes filing, creditors are using Chapter 11 to get a look at Wayne Gretzky's tax returns.

It has been a crazy year for Chapter 11's. Look for it to continue with all the crazy precedents that have been set for better or worse (mostly worse).

Cheers from Scotland,


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