By David A. Lander

Co-Chair - Business Bankruptcy Practice Group

Gallop

St. Louis, Missouri

Chapter 11 bankruptcy is an American business tradition, particularly in times of industrial change. While not necessarily the most welcome of business customs, the reorganization of a company’s debt has enabled many organizations to emerge from fiscal disaster better-equipped to survive another day and, often, prosper over the long haul. This is evident among U.S. industries ranging from airlines to automobiles, building materials, electronics, retailing, publishing and virtually every other industrial sector.

Chapter 11 bankruptcy proceedings have shored up many troubled U.S. companies, large and small. Chapter 11 reorganization is applied by corporations and businesses swollen with fiscal obligations (such as for employee benefits or debts for necessary vendors, supplies or services) or heavily leveraged acquisitions that impact their ability to function as a going concern and attain or sustain profitability.

The Chapter 11 process enables such companies to develop a plan to reorganize their fiscal obligations, cut costs, re-address instruments of debt and negotiate new arrangements with product or service vendors, or with unions, while designing a roadmap and schedule to emerge from bankruptcy and return to profitability.

Chapter 11 bankruptcy reorganizations have helped build financial bridges for companies that are forward-thinking and efficient. Well-managed bankruptcy proceedings can float companies out of potential default and postpone their day of reckoning. Chapter 11 does give troubled companies time to address needful changes. Long-term outcomes are virtually impossible to predict, yet will depend on the quality of company management and healthy doses of good luck, along with a well-developed reorganization plan that “covers all the bases” and strives to minimize potentials for additional financial risk.