Creditors' Resource : Bankruptcy and Creditors Rights Advisor : Corporate Recovery Associates : Richard J. Feferman : Creditors Committee, Reclamation, Unsecured Creditors

    CNNMoney.com reports credit insurer Euler Hermes ACI forecasts a 45% increase in bankruptcy filings in 2009. Banks are in danger as US business bankruptcies may be up sharply.

    The FDIC reports year over year charge-offs to commercial and industrial borrowers are up by $4.2 billion as of the end of the first quarter. Credit rating agency DBRS states "business bankruptcies surpassed the peak levels of the previous cycle last year, and there is little to suggest that business bankruptcies have reached their peak."

• Email This
• Print
• Trackbacks
• Share Link

Dear Sir:

The goal of federally financed bailouts should only be to augment feasible plans of reorganization, not to prolong the life of businesses beyond hope.

Bailout recipients should be required to devise and execute a feasible "Plan of Reorganization" as in Chapter 11 of the Bankruptcy Code. The financing could be in 2 parts: 1) the first part can provide interim financing while a Plan of Reorganization is developed; and 2) the second part will be "Exit Financing" that should only be provided to companies that can prove a that they have a feasible Plan of Reorganization.

All of the laws to administer the process are present in the Bankruptcy Code, with the exception of any legislation needed to let the government step into the shoes of the provider of the money. The Bankruptcy Courts also provide the only forum where certain issues can be dealt with (renegotiation or cancelation of existing contracts, protection for warrantee holders, etc.).

To handout money without conditions is not fair to the taxpayers, however given the seriousness of the financial problems we are faced as a nation perhaps a structure that requires responsible action by the recipients (with a recovery for the government) makes sense.

Respectfully,

Richard Feferman, Certified Insolvency and Restructuring Advisor
Corporate Recovery Associates
3830 Valley Centre Drive, Suite 705-152
San Diego, CA 92130
Tel: (858) 792-7473
email: richard@crarecovery.com
blog: www.creditorsresource.com

 

• Email This
• Print
• Trackbacks
• Share Link

 A couple of articles in the Wall Street Journal here and here are the basis for my bet that we are going see claims against Lehman's directors and officers insurance coverage. Perhaps even a fight over who is entitled to make claims against any policies. See Kimberly Melvin's article for background on D&O Policy Proceeds as Bankruptcy Estate Assets.

• Email This
• Print
• Trackbacks
• Share Link