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 ?
Under the agreement, the secured claim is the only allowed claim that Countryside will have in the Chapter 11 case.
Our new facility can be converted to permanent exit financing, securing the debt financing Northwest needs to emerge from Chapter 11 protection.
USEB intends to continue normal business relationships and functions with utility customers during the Chapter 11 process.
We are pleased that we have accomplished our initial objectives to stabilize the company while entering Chapter 11," said Larry Denton, chairman and chief executive officer of DURA Automotive Systems.
Bankruptcy Court for the District of Delaware is presiding over the Chapter 11 proceedings of DURA and its U.
Subject to receipt of all required approvals, the Company expects to emerge from chapter 11 during the first quarter of 2007.
and Banc of America Securities LLC for up to $790 million of exit financing, of which it expects to draw approximately $645 million upon the Company's emergence from chapter 11.
Under the chapter 11 plan that became effective today all of the equity in Navigator Holdings PLC will be transferred to the holders of Navigator's 10.
Harrison has been counsel to (i) one of the largest iron ore producers in the world regarding its multimillion dollar iron ore contracts with Bethlehem Steel and Georgetown Steel, (ii) the statutory representative of certain employees in the Federal Republic of Germany in the Chapter 11 case of a major international airline, (iii) one of the largest South American cement companies in a defense of an action commenced in the United States by a Chapter 11 debtor seeking damages for alleged bid-rigging, and (iv) a French special purpose vehicle in the successful acquisition of a prominent retail furniture business in Chapter 11.
Smart Papers LLC, Hamilton, Ohio, USA and certain of its affiliates announced they have filed voluntary petitions for relief under Chapter 11 of the U.