Chapter 11


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Chapter 11

The process of the reorganization of a bankrupt company under the supervision of a court or the appropriate regulator. Chapter 11 proceedings require a reorganization plan, which is filed with the bankruptcy court or regulator and describes how an insolvent company will change structurally to help it pay its debts and stay in business. This plan is subject to court or regulator oversight to ensure enforcement. Depending upon the specific plan, a company's original owner or managers may maintain control. Other times, the company's creditors become the new owners of the business; this especially happens when one or more creditors have had their debt completely discharged. Changes also must occur structurally (perhaps in risk management or marketing or perhaps in something more fundamental) to ensure that the bankruptcy does not repeat itself.

Chapter 11

A bankruptcy option in which a trustee is appointed to reorganize the bankrupt firm. Although the existing claims of security holders are likely to be reduced or replaced with different claims, it is expected that the firm will continue operating. Both creditors and owners must vote approval of the plan before the reorganization can be confirmed by court action and become effective. See also prepackaged bankruptcy, reorganization plan.
Case Study The turn of the century produced difficult business conditions for many companies, including one of America's technical giants, Polaroid Corporation. Founded by Edwin Land and George Wheelwright in 1937, Polaroid was best known for instant photography and glare-free sunglasses. During the 1960s and early 1970s the firm's common stock was part of the "Nifty Fifty," a collection of must-own securities for many portfolio managers and individual investors. Changing consumer preferences, a technological revolution in photography, debt incurred to fend off an attempted takeover, and faulty management decisions during the next several decades sent the firm's stock into a downward spiral until the shares traded for only 28¢ just prior to filing for Chapter 11 bankruptcy protection on October 12, 2001. At the time of the filing the company listed $1.81 billion in assets and $948 million in debts, including a $360 million bank loan that was due in one month. The stock traded as high as $60 per share in 1997. Polaroid's problems stemmed in large part from the increased popularity of digital photography, which captured substantial market share from the firm's products in instant photography. Other photographers discovered the widespread availability of one-hour processing was nearly as convenient and less costly than instant photography. Polaroid had taken on substantial debt in 1988 when it successfully fought a takeover attempt by Shamrock Holdings. The combination of large debt, high costs, and deteriorating market share doomed an American icon. At the time of the bankruptcy filing many analysts expected the firm to be liquidated and its assets sold piecemeal.
References in periodicals archive ?
Far from the "protection" that the bankruptcy law supposedly offers, Stein soon discovers that Chapter 11 has put him at the mercy of greedy lawyers, bumbling judges, and vindictive claimants bent on his destruction.
The goal of this Video Leadership Seminar is to provide lawyers and executives with essential information for negotiating agreements pertaining to the acquisition and sales of companies in Chapter 11 bankruptcy.
Citation filed for Chapter 11 protection in September 2004 due to a sluggish economy, reduced orders and the rising costs of steel scrap and other commodities.
The SOP's applicability to prepackaged chapter 11 bankruptcies.
applied only to Chapter 11 trustees, and that a liquidating trustee is not a trustee under Chapter 11 but is rather a contract trustee performing limited and essentially administerial functions.
Of course, the main reason you file for Chapter 11 is to get the bankruptcy court to approve a reorganization plan that you have negotiated with your unsecured and secured creditors.
Wilmer Cutler Pickering Hale and Dorr LLP serves as special counsel to USEY in connection with USEB's Chapter 11 cases.
Electron, including its facility in Blackwell, Oklahoma, filed for Chapter 11 November 19.
Angeles stated that the Chapter 11 filing was prompted primarily by its default on interest payments on its outstanding debentures and certain other obligations, as well as ongoing cash flow problems.
Key chapters are chapter 7 on liquidations and chapter 11 on reorganizations.
PK) announced today that the United States Bankruptcy Court for the District of Delaware has confirmed the Company's Second Amended Joint Plan of Reorganization (the "Plan"), setting the stage for the Company's emergence from chapter 11, which is expected to occur on February 12, 2007.
today announced the voluntary filing of a Chapter 11 petition in Los Angeles for reorganization under the federal bankruptcy laws.