Word: chaptered
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Like any hotly contested issue, Chapter 11 has its share of champions. "On balance, Chapter 11 has been positive for the economy," says Edward Altman, a finance professor at New York University's Stern School of Business. "It conserves the assets and values of firms that have temporary problems but can be rehabilitated." Altman and doctoral student Edith Hotchkiss conducted a study that found that at least half the 1,096 firms entering Chapter 11 between 1979 and 1991 emerged successfully and have managed to stay out. That study focused exclusively on publicly held companies in Chapter...
...experts dispute that Chapter 11 cases can run up huge -- and often excessive -- legal and professional fees, especially when big companies are involved. LTV Corp., a steel and aerospace conglomerate, which had sales of $6 billion last year, has forked out more than $100 million in legal fees since it entered Chapter 11 in 1986 yet remains mired in debt. As the megacase grinds on, LTV's bills are piling up at the astonishing rate of $2.5 million a month...
...owners and managers of companies in Chapter 11 can do very well for themselves, thank you, even as creditors take a beating. William Farley put his $3 billion empire, which includes Fruit-of-the-Loom apparel, into Chapter 11 last year. But analysts say Farley could keep as much as $100 million of his personal fortune and homes in Chicago, Aspen and Maine. In Washington, real estate developer Dominic Antonelli Jr. has reached agreement with his creditors in a $700 million Chapter 11 case that would allow him to keep, among other things, $1.9 million in cash along with stock...
Inside ailing companies, Chapter 11 filings can lower morale and strain already tense relations between bosses and employees. Some TWA workers question owner Carl Icahn's motives for placing the airline in Chapter 11 in January. Instead of striving to clean up the company's finances, they say, Icahn's real goal may be to use Chapter 11 as a shelter from which to conduct fare wars like his current battle with American Airlines. "Chapter 11 can be a good opportunity for a company to cleanse itself of past mistakes," says Bill Compton, chairman of the pilots' union local...
Federated Department Stores emerged from two years of Chapter 11 proceedings in February after new managers shed $5 billion of the $8.2 billion of debt that previous owner Robert Campeau had accumulated. Federated -- the parent of Bloomingdale's, Rich's, Burdines and other chains -- spent much of the Chapter 11 period reorganizing its finances and closing weak stores. Macy's also got a new-management look last month when chairman Edward Finkelstein resigned after filing Chapter 11 papers in January. Finkelstein had come under increasing fire since using debt to achieve a $3.7 billion buyout of Macy...