Psyche

Very few companies emerge from bankruptcy profitable. Even fewer companies remain in bankruptcy and yet continue to be profitable. Such is the tale of W.R. Grace & Co. (NYSE:GRA) The Chapter 11 case of the chemical company deserves a tale of its own, and not just a story. The reason is: the company has been in bankruptcy since April 2001 and is still in bankruptcy after almost 12 years. And the company has been profitable since. As of Jan. 30, 12:54 P.M.(EST), Grace’s shares of common stock, listed at the New York Stock Exchange under the ticker symbol “GRA,” were trading at $71.74 per share, recording a 52-week low of $47.40 per share and a 52-week high of $72.55 per share. The company has said it will release its financial results report for the fourth quarter 2012 period in early February. The company has consistently reported income and positive sales in its financial reports. In fact, the company was solvent when it filed for bankruptcy. The company just needed protection from thousands of asbestos-related lawsuits arising from the operation of its prior businesses, which the company has already divested off. Asbestos litigation is one of the most popular litigation in
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One common reason cited as cause for bankruptcy filing is legacy obligations. Many companies have sought protection under the Bankruptcy Code in order “avoid” these legacy obligations. Delphi Automotive PLC (NYSE:DLPH), which was a spin-off of General Motors Company (NYSE:GM), entered bankruptcy in 2005, in order to avoid obligations that were left over from its being a subsidiary of GM. Most of those legacy obligations are obligations to employees and former employees. Legacy obligation is the same reason used by Patriot Coal Corporation (PINK:PCXCQ), one of the biggest coal mining company in the U.S., sought bankruptcy protection in May last year, listing $3.6 billion in assets and $3.1 billion in debts. The company, in its “first-day filing,” said it sought protection in order to “make the necessary changes to become competitive and to emerge as a long-term industry participant” after years of struggling with low coal prices and operating under tough environmental rules. The company, in a hindsight, also wanted to do away with its legacy obligations, including substantial health care benefits owed to its retirees and widows. Like Delphi Automotive PLC (NYSE:DLPH), Patriot Coal was also product of a spin off. Peabody Energy Corporation (NYSE:BTU), in 2007, spun off
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Reorganization could well mean resurrection. Although not all companies that file for bankruptcy emerge to be better, stronger, some companies use the new lease of life to restructure debts and trim down core operations in order to come out as more valuable and more operationally-successful companies. Such is the case of Hawker Beechcraft, the Wichita, Kansas-based aircraft manufacturer, which sought bankruptcy protection in May last year amidst the sluggish business jet market and debt load. Hawker Beechcraft, which plans to shorten its name to Beechcraft Corp. when it emerges from bankruptcy, anticipates leaving Chapter 11 in the second half of February, if the judge overseeing its bankruptcy proceeding approves its plan of reorganization. The plan, according to a company statement, was overwhelmingly backed by key creditors. In a Chapter 11 case, once a so-called plan of reorganization has been submitted to court, creditors, especially those whose claims are purported to be impaired under the plan, are required to vote on the plan. There must be majority approval of the impaired creditors for a reorganization plan to be confirmed by a bankruptcy judge. A confirmation could signal a near exit, although it is not an assurance. The aircraft maker’s plan provides
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Test-preparation company, Education Holdings 1, Inc., was one of the earliest bankruptcy filers this year. The petition, delivered to the U.S. Bankruptcy Court in Manhattan, said the company has $100 to $500 million in assets and around the same amount of debts, although the bankruptcy petition is a mere checklist and these amounts may be lower or higher. The actual value of a debtor and its assets and liabilities are disclosed in the so-called schedules of assets and liabilities and statements of financial affairs, which are typically filed 15 days after a bankruptcy filing. Education Holdings though have sought permission from the bankruptcy court overseeing its Chapter 11 case to do without the filing of the schedules and statements because it already has a plan for reorganization, negotiated prior to its bankruptcy filing. The plan, termed a “prepackaged plan,” will be voted on by senior secured claim holders, who are owed at least $36.3 million, second-lien facility claimants due $7 million and other note holders owed more than $110 million. The votes of these claimholders are necessary for Education Holdings to obtain the approval of the bankruptcy court as the prepackaged plan impairs the claims of the three groups of
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The game is over — at least for Atari SA (EPA:ATA), as it sought protection under Chapter 11 of the U.S. Bankruptcy Code in order to separate itself from its unprofitable French parent. The company, which has more than 200 videogames under its portfolio, listed debts ranging between $10 and $50 million, which includes the $28 million credit facility the company owes BlueBay.  Atari’s assets range between $1 and $10 million. The company said it owes at least 200 creditors, with a possibilty that figure will increase to around 1,000. Atari and its three subsidiaries — Atari Interactive Inc., Humongous Inc., and California US Holdings Inc. — said it will either sell all or substantially all of its assets, or push a reorganization plan through confirmation that will result in the same in order to realize its value. Atari,  founded in 1972 is one of the pioneers of arcade and video games, currently the company is lagging behind Activision Blizzard, Inc. (NASDAQ:ATVI), the world’s largest video game maker by sales, and Electronic Arts Inc. (NASDAQ:EA).  In an effort to cut ties with its ailing  parent, Atari is seeking approval of a $5.25 million debtor-in-possession financing from funds managed by Tenor Capital
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A123 Systems, Inc. (PINK:AONEQ)’s bankruptcy filing was not just a financial or business concern. It also became a political issue when the company sought bankruptcy protection during the height of the 2012 Presidential elections, where incumbent President Barack Obama was seeking reelection. A123 System’s bankruptcy was another issue hurled by Republicans against Obama, noting that the company received around $250 million as grants from the government three years earlier in the hopes of bringing in more jobs to the U.S economy. Founded in 2001 by an entrepreneur and a scientist from the Massachusetts Institute of Technology (MIT), A123 Systems sought to revolutionize the automotive industry and automobiles’ consumption of energy. The battery maker had deals with General Motors Company (NYSE:GM) before the automaker filed its own bankruptcy, but those deals turned sour when GM chose South Korean LG Chem Ltd (KRX:051910) (KRX:051915) to produce the battery cells for a line of its hybrid cars. A123 Systems, Inc. (PINK:AONEQ) applied for $1.84 billion in federal loans to build plants in the U.S. for rechargeable hybrids and electric cars. The financial aid and brilliant ideas, however, were unable to save the company from falling into bankruptcy. The battery maker made missteps in
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Bondholders are fighting against retirees and former employees of Nortel Networks Corporation (PINK:NRTLQ), once the largest telecommunication equipment company in North America, over some $9 billion in cash. The squabble, which came after the telecommunications company sold off most of its assets, could be one of the world’s most complex transnational legal proceedings in history, commented Ontario Chief Justice Warren Winkler, who was appointed mediator by both U.S. and Canada courts having jurisdiction over Nortel’s bankruptcy and insolvency proceedings. Nortel Networks Corporation (PINK:NRTLQ) sought protection under Chapter 11 of the U.S. Bankruptcy Code and the Companies’ Creditors Arrangement Act (CCAA) in January of 2009. Nortel is one of the largest failures in the telecommunications equipment industry, despite its successful creation of optic equipment that carried most of the Internet’s data during the 1990s. When the company filed for bankruptcy, analysts had already forewarned that the company, which was saddled with too much debt, would never survive and would end in liquidation. Aside from financial problems, Nortel also faced an accounting scandal that led to the charges against three of the company’s former executives for defrauding the company of $12.8 million in bonus payments. This is a story very similar to
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The year 2012 may be marked as the year when many, more than 30, green companies that benefited from government  loans were either not performing very well or have already sought protection under Chapter 11 of the U.S. Bankruptcy Code. One of those green companies to file for bankruptcy was Solar Trust of America LLC, holder of the development rights for the world’s largest solar power project, a 1,000-megawatt solar power plant called the Blythe Project, in Southern California. The company sought protection from bankruptcy in April 2012 despite receiving $2.1 billion of conditional loan guarantees from the U.S. Department of Energy after falling short of liquidity when its Germany-based parent, Solar Millennium AG (ETR:S2M) (FRA:S2M), which holds a 70% stake in the U.S. unit, also sought court protection months before. Solar Trust’s bankruptcy is another failed venture of the U.S. government into capitalism, especially in the green economy sector. Solar Trust failed to make its rent payments on the Blythe project and its parent failed to garner a purchaser of its stake in the U.S. unit. Solar Trust’s projects, which also includes two 500-megawatt solar power plants near Desert Center, California called the Palen Project, and in Amargosa Valley,
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A group of banks and financial institutions have reiterated their desire to go after Phil Falcone and his company, Harbinger Partners Capital, for a pre-bankruptcy loan they extended to broadband company, LightSquared Inc. The lenders alleged in court papers that Falcone and Harbinger, who indirectly owes more than 90% of the outstanding common stock of LightSquared, misused its control of the broadband company. The lenders, composed of Appaloosa Management L.P., Capital Research and Management Company, Cyrus Capital Partners, L.P., Fortress Investment Group LLC (NYSE:FIG), Knighthead Capital Management, L.L.C., Redwood Capital Management, LLC, Silver Point Capital, L.P., and Solus Alternative Asset Management LP, formed an ad hoc committee representing other secured lenders. The ad hoc committee sought authority to file a lawsuit and pursue claims against Falcone and Harbinger. LightSquared, one of the first companies to offer mobile satellite services in North America, sought protection under Chapter 11 in May 2012 in order to, among other things, give it time to extend the maturity of a $320 million secured loan the company used to finance its 4G LTE open wireless broadband network. LightSquared is indirectly owned by Phil Falcone’s Harbinger.  When the company delivered its first-day petition to the U.S. Bankruptcy
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A mediator was appointed to assist in the plan negotiation process in the Chapter 11 cases of Residential Capital, LLC.  The appointment came seven months after ResCap, a subsidiary of ALLY FINANCIAL, INC. (PINK:ALFI), sought protection under Chapter 11, after becoming a victim to the collapse of the residential market that rocked the country some years ago. Prior to filing for bankruptcy, ResCap was the fifth largest servicer of residential mortgage loans in the United States, servicing approximately $374 billion of domestic residential mortgage loans and working with more than 2.4 million homeowners across the country. ResCap filed for bankruptcy in order to sell all or substantially all of its assets, including its mortgage loan origination and servicing business, and its “legacy” portfolio consisting mainly of mortgage loans and other residual financial assets. The company was already in talks with potential buyers of its assets prior to filing for bankruptcy. From May until November this year, the sale process was robust, with the initial buyers being overbid and the initial bids increasing as a result of the competitive sale process. Finally, in late November, the bankruptcy court overseeing ResCap’s Chapter 11 case approved the sale of the mortgage loan origination and
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A company “stuck in time.” That’s how many would describe Eastman Kodak Company (PINK:EKDKQ), pioneer of photography technology. While every other photography company has moved forward and entered into the digital realm, Kodak remained “stuck in time” by focusing on too much on their history and failing to capitalize on an important invention — the digital camera. Everybody embraced the digital invention, including rival companies, and Kodak started in the race already too late to generate significant revenues from what was originally theirs. Finally, after more than 130 years, Kodak, founded by George Eastman in 1880, succumbed to bankruptcy, listing $5.1 billion in assets and $6.8 billion in debts. Revenues were falling because film was no longer popular and Kodak could no longer compete with Canon Inc. (NYSE:CAJ) and Hewlett-Packard Company (NYSE:HPQ) in the digital camera and printing businesses. At the time of its bankruptcy filing, Kodak was already on its sixth annual loss for the past seven years and has already tried to sell more than 1,100 digital imaging patents. Kodak has also pursued royalties to fund its digital printing business and initiated litigation against many companies, including Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) for alleged
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