Word: creditors
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Even after they sign up clients, turnaround specialists must land a spot on court-appointed creditor committees before they can earn big payments. To boost the odds in their favor, specialists often bombard the creditors who head the committees with letters and phone calls as part of campaigns known as "beauty contests." In the wake of the Campeau bankruptcy filing, 50 leading legal, accounting and investment firms have been battling for some 15 < seats on the all-important creditors' panels. Says a disappointed attorney who lost the opportunity to earn at least $300,000 in monthly fees...
...reaction to the last-minute payouts was swift and brutal, especially among Drexel creditors. One large unsecured creditor, First City Bancorp. of Texas, quickly filed a motion in federal bankruptcy court in New York City asking for an investigation. The New York Times lambasted the bonuses as a case of greed worthy of the Guinness Book of World Records and called on Drexel executives to return the dough. In Washington committees in both the House and the Senate are planning hearings this week that will explore the issue. "It may be that the payments themselves rendered Drexel insolvent," says attorney...
...moves were the latest in a takeover saga that began when Canadian developer Robert Campeau acquired Allied Stores and Federated Department Stores for $10.2 billion in the 1980s. The bankruptcy filing will hold off major creditors while allowing the stores to remain open and pay suppliers promptly. But before it can emerge from bankruptcy, the American operation must work out a creditor-repayment plan that is likely to require the sale of at least some of the company's nine retailing chains...
...certainly no shortage of skepticism about Collor's chances of succeeding, even though Brazil's foreign bankers generally approved of the people's choice. "No Brazilian politician has a shred of credibility in the marketplace," says Lawrence Brainard, a senior vice president at Bankers Trust, a major Brazilian creditor. "So people will simply discard what Collor said prior to elections and see what he actually does...
...good news is that booming international trade is spreading wealth around the world. The bad news is that the U.S. was the world's largest creditor in 1980 but went into the red in 1985, and has become the world's largest debtor. Its trade deficit runs about $150 billion a year. Foreign holdings in the U.S. now amount to $1.5 trillion, compared with $1.2 trillion in U.S. assets abroad. And meanwhile, the grinding poverty of the Third World, by now $1 trillion in debt, has not improved in the least...