Business Bankruptcy Law | Small Business Bankruptcy Laws

What happens to the shares of a public company that declares Chapter 11 bankruptcy protection and comes back into business at a later date? For example, General Motors declared bankruptcy in June 2009 and after asset sales it came back into business in July 2010 and got listed on NYSE in November 2010. I believe the ticker symbol “GM” didn’t change from bankruptcy. So the old shares are valid or they are worthless? I know that the value of shares of a company declaring bankruptcy is ZERO unless there’s any money left after paying all the creditors through the bankruptcy court.

But in case of a company that comes back after re-org or restructuring through bankruptcy, what is the value of “old” shares? For example, say Kodak files for bankruptcy. Currently, its total equity is -1.7B. Say, it is able to sell some of its patents for 2B and pays off all the debt and decides to come back into business as it has printer business and other patents. What would then be the worth of the current shares of EK? I am not much familiar with law terminology so anything in simple terms is much appreciated. Useful links for further reading would be great as well…

Liberals, will GM fail again?
What did Gov Motors changed for their business model?
How will they do with their toxic legacy cost?

If gm issues another ipo, well I will short sell the stock and close my position when they file for chapter 11 again!

In a real capitalist system, gm’s competition would had ate their market share, along with GM’s vendors,suppliers and other key players!

America is broke and we can not keep on bailing out the dead weight of society!
They produced a profit because they sold part of their car division, which was an one tine gain, otherwise, the operational side is still toxic.

they didn’t build the cars people wanted?

I have news for you. GM , Ford, and Chrysler tried building small cars and they lost money on all of them. The Labor Unions have driven up labor costs to levels 60% to 120% higher than the labor costs of Honda, Toyota, and German plants within the USA.

The only vehicles that were profitable were the SUVs and Trucks because it takes just as much labor to build a small car as it does an SUV (roughly) but you can sell an SUV for a higher price.
The Japanese can build all these small cars with a labor force that is non-union.
And you can’t blame the management for "allowing" the Unions to take over the businesses. If GM played hard-ball, (and they tried a few times), the Federal judges would always side with the unions and force GM or Ford to cave in.
GM, Ford, and Chrysler would have been bankrupt by 2002 or 2003 if not sooner if it were not for SUVs and trucks. If Japanese plants were required to have unions, or if GM could axe their unions, it would be fair. But as it is, Bankruptcy is inevitable. Blame it on the Government, like usual, for distorting the markets and allowing unfair trade to thrive and fester and destroy our economy.
Karen,
Then why isn’t Toyota opening their shop to unions?

So I was minding my own business when I got a call from my mortgage company today concerning the home I’m having built. It seems that mortgage rates ran violently upwards in just 48 hours from under an average 30 yr fixed of 5% to 5.45%. Of course, the mortgage company I’m using is already quoting above the average, so they’re quoting me a current rate of 6.5 with something like 2 1/4 points to buy down the rate. Unreal. Just last week, it was 5.25%

How did this happen? FED buying policies this week caused Treasury 10-yr rates to soar, which the mortgage rates are apparently tied to.. They’ve been doing this for months, keeping the rate artificially low, using stimulus money to buy funds on the market. But the marketplace competition has become more heated and this policy may not succeed much longer. Come to think of it, I remember my International Finance teacher from college saying this kind of practice was dubious and only delays the inevitable and makes the crash harder than it needs to be.

I expected rates would go back over 6% by the time my house was done in November, but now, 7.5-8% by Christmas seems like a real probability. There’s no way the FED’s going to be able to buy down the price. So I guess they’re going to have to have Treasury print some more money leading to higher inflation.

And all this going on, while GM is about to restructure in Chapter 11, most certainly causing unemployment numbers for June to rise once a plan is in place.

So higher inflation, higher unemployment, higher mortgage rates preventing new home buyers or people that wanted to refinance. I’d say the stimulus package is working just dandy. Seems like the only thing they haven’t done yet is raise taxes…..no wait, that’s coming too.

Your thoughts?

I’m also sick of stimulus packages, but whatever. The first one worked so well, lets have another. I hate this concept of bailing out companies. Yeah, Yeah, I do feel sorry for employees who get retrenched. My first un-researched thought about the auto bailout is… GM and whoever else was not nimble enough to adapt should go into chapter 11. They own lots of nice buildings and stuff. Profits from the proceeds will go to pay for their existing pension/health plans, stockholders get squat, CEO’s get squat. Then car companies like Toyota or whomever else is solvent will buy their assets. The workers will get new jobs under a new label. Of course the Unions will freak out, but these companies need to adapt or die. They are leaking boats demanding tax payer dollars so they can keep leaking. There are car manufacturers which have business models that can and do make a profit. They employ lots of people. Paulson and his flip-flops make me naseous. I’m all for the little guy, in fact I am a little guy. I just despise a bail-out. It’s Darwinian. If I thought the US auto industry could adapt in time, and we could save a few little folk, I’d be very slightly okay with the concept. Government intervention is a stop gap at best. Commentary anyone?

Everywhere I look, I keep hearing people talk about how the government should just let Ford, GM, and Chrysler die. My question is why would anyone ever wish for that to happen?

I’m a big fan of Capitalism, I adhere strongly to the belief that companies should be held accountable, however, in the situation of GM, Ford, and Chrysler, I honestly think the government needs to step in. The government needs to protect itself from foreign influences and it needs to protect its key core businesses from international takeover.

We all know that the Japanese government helps out its car industry like Toyota, Nissan, Mitsubishi, they have very good government backing therefore they are very strong. For instance, you would never see a foreign company being allowed to buyout Toyota Motor Company even if that hypothetical company could afford it, why? Because the Japanese government would never allow it, just like France would never allow Boeing to buyout Airbus.

This lead to an unfair marketplace for the American Auto Industry. Now, had our government stepped in and supported our Auto Industry, I think the industry as a whole would look so much different today. Unfortunately it didn’t and GM, Ford, and Chrysler were forced to focus on SUV’s because that’s what sold during the 90’s, and unlike Toyota, GM, Ford, and Chrysler, did not have the deep pockets to fully support next-gen passenger car program as well as a money-making SUV program. And as you know, money is necessary to maintain future operations, so GM was forced to devote most of its resources to making the cars people wanted to drive at the time.

Had the Big 3 had government support/aid during the 90’s perhaps we would have gotten a vehicle like the 2008 Malibu and CTS much earlier. However, if GM had decided to focus it’s attention on the cars that it needed rather than the cars that people wanted, it would have quickly gone bankrupt.

And right now as we speak rumors of bankruptcy are heard throughout the market place, as well as rumors of the end of the Big 3.

This would be one of the worst things to happen to the American Economy during a good economic period. If it happens now in our current economic state, it will be disastrous.

GM directly employes what, about 200,000+ (maybe less since all the recent layoffs) and I know Ford and Chrysler employ quite a few workers as well, but let’s focus on GM.

So if GM dies, that’s 200,000 for the unemployment office. However, that number doesn’t include those that will become jobless as the result of the domino effect a GM bankruptcy will have on other companies.

GM has the most dealerships with it’s many different brands, if these were all to suddenly close, we can add more people to the unemployment line. In addition to dealerships, many part manufacturers have GM as a primary customer ( think American Axle, Allison, Eaton, Delphi, Bose, AC Delco, etc), then there are those companies that contract with GM for vehicle delivery,etc. And as a result of this sudden unemployment, forclosure rates could go up at an unprecedented rate as those no unemployed can no longer afford to stay in their houses.

A GM bankruptcy wouldn’t just affect GM workers and GM Fans, it would affect the jobs of a lot of people around the country. If you thought our current unemployment rate was high, a GM bankruptcy would make todays numbers look small.

In fact, a GM bankruptcy wouldn’t just affect American workers, but workers in Canada, Britain, China, India, all places where GM has factories.

People blame GM and other companies for building factories in other countries and bringing those cars here, well, who can blame them? With UAW fighting for +per hour wages for High School educated people, I’d move my factory to a place where I can pay the people what they truly deserve to be payed rather than what some labor union tells them that they are entitled to be payed.

The government really needs to step back and take a look at the bigger picture regarding the Big 3. A decision regarding a "bailout" of the Big 3 will either make the presidency of whoever wins in November, not to mention it may make or break the future of our country as an economic/world power.

Perhaps the old say really is true, "What’s good for General Motors, is good for America".

1.
The U.S. economy has lost 2.64 million jobs since you took office. The unemployment rate is 9.5% and rising. The good scenario is one in which the unemployment rate begins to decline early next year. The Vice President said your Administration misread the economy. You said you had incomplete information when proposing the stimulus. Yet you have said you would not change anything about the stimulus if you could. If the facts have changed, why doesn’t it make sense to change your policy?

2.
Last month’s jobs report was the first since you took office that was worse than the prior month. Do you think the economy is getting stronger or weaker right now? If the next jobs report gets still worse, will you re-evaluate the need for a change in fiscal policy?

3.
Do you maintain your promise not to allow taxes to be raised on people earning less than 0,000 per year? Will you insist that health care legislation conform with this commitment?

4.
Chrysler and GM have exited bankruptcy. Are U.S. taxpayers done subsidizing these firms? What is your exit strategy from taxpayers owning much of GM and Chrysler?

5.
You proposed spending money from the TARP to prevent foreclosures, help small businesses, and to buy toxic assets from banks. In June CBO said they had found no evidence that any money has been spent for any of these programs. How many foreclosures have been prevented, how many small businesses have received loans from, and how many toxic assets have been purchased?

Rush Limbaugh, the Junkie who serves as the main voice of the Republican party, has come out saying that his minions should stop President Obama from achieving the real change that America needs after 8 years of failed policies under Bush and the Republicans.

Now, Republican America-hater Jim DeMint has come out saying that the Republicans need to keep America from moving forward with sensible health care reform so that the Republicans can continue their failed agenda in the future.

These people are playing politics while America struggles to get out of the economic hole that their failed policies got us into.

Millions of Americans have no health care.

Millions of small businesses are driven out of business because they can’t afford health care costs.

The current health care system that funnels money into the pockets of the Republicans’ Wall Street donors has driven GM and Chrysler into bankruptcy.

Why are Republicans so willing to play politics rather than to work to make America better?

The man charged with turning General Motors around said he knows nothing about the auto industry.

Edward Whitacre, 67, was appointed to run the automaker after it emerges from bankruptcy — but by his own admission knows nothing about the industry he is overseeing.

"I don’t know anything about cars," Whitacre told Bloomberg. "A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same."

Whitaker, or "Big Ed" as he’s known in the business, made his name running AT&T and its predecessors and is the only non-CEO to lead GM’s board in half a century.

General Motors filed for Chapter 11 bankruptcy protection and hopes to emerge from court protection in no more than 90 days. Whitacre will then step in and try to turn the company around.

But telecom industry analyst Victor Schnee told the the Assoicated Press that Whitacre’s appointment was "bizarre."

"The guy accomplished a number of things in telecom and we all thought the book was closed," he said.

Former GM Chairman and chief executive Rick Wagoner was ousted by the Obama administration in March.

I am wondering about the accuracy of the media’s reports regarding the supposed tightening of credit markets and credit lines for individuals and small businesses. In my area, banks and other lending institutions have been heavily bombarding the radio and tv with ads stating that there is no credit crunch, that they have ample money to lend, that if you could have gotten a loan a year ago, you still can, etc. -basically they are begging people to come in and get a loan for everything from a house to a car to a 0 personal loan!

Also, the media’s reports of a tightening of credit card lines also seems to be a fable. I have talked to various individuals in my area and have discovered that 4 of my friends and family have had their credit lines automatically increased on their credit cards and so have those of several small business owners that I have talked with.

"Maybe" this is a result of the 700 B. TARP, but I am doubtful of that since one of the major lenders to GM shut down their credit line even when it was looking like they would get their bailout loan (or maybe the lender was just scared to lend to a failing company facing bankruptcy, but I digress).

I am just wondering basically if anyone else is seeing such a push in their local area from lenders trying hard to get people to borrow money. Has anyone seen this? If not, what is the situation that you are seeing. I am on the east coast, by the way.

The bail outs are not free market capitalism, that’s fascism to have the government dictate the market.

Don’t tell me it divides the rich and the poor. 50% of the American GDP is from small businesses – Fortune Magazine

Not to mention majority of America is middle class, there are more suburbs then any other form of society in America. Middle class to me sounds balanced, there isn’t a majority of lower or upper class, only a select few in population.

In free market capitalism the consumers dictate what they want to buy, the businesses can’t survive unless they satisfy what the consumer wants to purchase.

With the bail outs the government chose to do ruined the free market, the consumers dictated they don’t want cars from GM, the government intervened and bailed them out. In a free market capitalist system, that company would go out of business, and a more efficient business would move in that territory and do a better job. Bailing out GM will come back to haunt us if it fails again, it will mandate another bail out or bankruptcy.

The banks them selves aren’t truly a free market. They are mandated by the government with so many regulations they lose their freedom to choose what to do. The Community Reinvestment Act which Fannie Mae in 1992 was invested in crashed later at the end of the Bush Term in 2008. That’s 18 years difference in time. Home Mortgage loans take time to pay off. If you give loans to people that have bad credit obviously they’re a hazard to possibly repay it back. Banks where mandated by the government to give out the loans to people that didn’t qualify. Not discrediting banks being greedy they where, but it was the bureaucracy that enabled banks to have bad practice.

http://en.wikipedia.org/wiki/Community_Reinvestment_Act – Read the History

The regulations banks under went with all the changes and enabling them to give bad loans is the reason we feel this 18 years later. Most peoples home loans take longer then 18 years to pay off. Giving them to people that didn’t qualify makes it even more dangerous, with the housing market devalued the banks got the homes back with a lower value of the origional loan, cooping an even bigger loss since they can’t sell it back.

It’s not free market capitalism to bail out the banks, and it wasn’t free market capitalism for the government to regulate banks on how they distribute home loans. The government made the mess, and it’s the tax payer that suffers. This isn’t free market capitalism. I just want to make sure you realize free market capitalism doesn’t involve government regulation/interference.

If you mention things like the FDA and FCC, those don’t dictate what company’s can sell their product at or anything, that’s for safety purposes, it will effect a company’s cost but they will just push it to the consumer, regulating the cost they put to the consumer will damage their ability to independently function in the free market.

So don’t bash a system you probably know nothing about. It really upsets me people watch Michael Moore’s movie and think that’s capitalism. Bail outs are not Free Market Capitalism, it’s government interference which is fascism.
Sakata Gintoki: Wow you’re pretty ignorant, the people in other countries wouldn’t have jobs in their country if it wasn’t for the US providing them. They would be killing each other and be unproductive. In any state where there is no employment, which can be a country like Somalia or even the great depression. It was and always will be out of order since there is no production, everyone will just kill each other and constantly be at war. There is no wealth generated. When employment happens, production increases causing wealth to be generated, and it’s peaceful. Government housing projects have the highest crime rates in America for a reason that is parallel to unemployment.
crunch: Free Market Capitalism hasn’t existed since FDR, his socialistic ideals make Americans dependent on the government. The more dependent on the government one becomes the less independent they become. Causing them to demand the government takes care of them. This is why we have health care reform, Medicare is costing America too much money each year, Obama is going to end Medicare and merge it with his new plan. It’s going to keep adding to our debt. I’d rather disable all government aid. Not allow doctors to be sued by Lawyers. Then sit back and watch the Doctors compete against each other for patients. There would be so much competition doctors would force each other to lower prices. Just like fast food when McDonalds introduced the dollar menu. Everyone else had to have a value menu because they where getting killed. The consumer will always win.
Sakata Gintoki: Wow you’re a whiny little blamer, do you understand everyone has the free will to choose what to do with their lives? You can’t blame the employer when the employee willingly works there. You can’t blame tobacco companies for people who smoke and get cancer since the individual should of known better. You’re discrediting the individuals right to choose what they want to do. You blame others for the individuals fault and sole choice they made on their own. You can’t blame someone when the individual chose to do it. No one is forcing anyone to work any where, unless it was a totalitarian state and mandates they must. That isn’t the case in Free Market Capitalism. The Employees can picket and not work there, if they picket and they get fired and replaced by others, it obviously tells everyone that the work environment must not be that bad if others still want to work there.
Matthew D: Middle Class is not defined by how much money you have, since the cost of living per state is different. Middle Class homes in So Cal cost 500k, if you took 500k to Alabama you could live in a mansion. The upper class homes here are valued from 900k and up in So Cal. You can’t live in a big house here. It depends on where you live and what the cost of living is. All suburbs are defined as middle class. Government housing projects are lower class, and the upper class are the few rich that live in areas the average person can’t afford. Most homes in America are affordable for the average American depending on which state you are in. Real Estate is about location, saying a value determines middle class is stupid, because 500k in so cal isn’t worth much compared to Alabama. It’s about each location and what the norm is.
AgriCult: I know who George Orwell is, he is an author of a book 1984 which was a prediction of how totalitarianism would spread. I know what his philosophy is. Second I want to say that Hitler was a Fascist, Fascism is two things.

1. The cause of race superiority.
2. The merge of corporations and government

I for one see number 2 clearly happening right now in our American society. 61% of GM is owned by the US Department of Treasury. It’s damaging the system America was built upon. The fore fathers wanted a small government, we are constantly stirring away from it, and I don’t want to have a government that is parallel to the king of England. If the government today owns many companies and the king of England taxed high percentages, what difference does it make. Either way the form of government generates a high revenue through ownership or taxation. I really dislike this, all governments can do is go bankrupt, we see it with the USSR, Nazi Germany, and with us being 11 trill debt.
remmycool: due to lack of comenting space I am allowed I will keep this short. I agree with everything you said, if the world was a free market system America’s value would decrease. I don’t mind that, I am not about superiority of currency, I am for the innovation free market capitalism has offered the world. I love it and it makes every bureaucrat look like a selfish dictator that wants the wealth through taxation.

I agree with your comparison of Zimbabwe and them being millionaires. Of course not everyone can be a millionaire, it would just be inflation and the value would be even more useless. The problem is people see the rich and think that they’re selfish. The belief of that is preposterous since the rich generated that wealth through smart investments. Every society there is a rich class, either a dictatorship/government or the people who choose to make innovative ideas in our democratic republic society. I hate the witch hunts people have on successful people.
Aidan: Well for starters I agree with you that the bail outs saved capitalism since it enables banks to give loans to businesses for what ever purpose they need it for. How ever I disagree that you will believe a government report on a government program they allowed. I see a bias there considering if they disagree with their own intended policy it will make them lose credibility, Americans will lose trust in them and no one would ever want something like this to happen again. To push this point even further look at the cause and effects of other programs.

Social Security’s cause is to allow you to be financially secure by the government past age 65, yet people past 65 still work and aren’t retired.

Welfare sounds nice to help people in poverty, yet those people become dependent on the program and always will be in poverty. There is no incentive to become independent and not depend on the government anymore.

I can go on and on, but I hope you get the point, plus I have no more space
x x: You do realize oil companies face a major restriction by the government of where they can drill. If oil companies could drill any where and have a massive quantity the price of it would lower. Gas would be much cheaper if it was accessable by oil companies to drill any where. The government restricts oil companies to drill any where. So oil companies must buy it from foreign distributors like Canada, and the tariff they pay to ship it here adds to the cost of production. Due to scarcity and the tariff cost, the oil companies pass these burdens to the consumers. Otherwise they would eat a massive loss and go out of business. Again that’s government regulation ruining the free market ability of oil companies drilling where ever they want. Gold is expensive because of the scarcity it holds as a natural resource. Same reason why you won’t pay money for dirt since it is every where it’s so common it doesn’t hold a value.

DETROIT – Bankruptcy protection for the nation’s biggest automaker is becoming more probable with a deadline just over two weeks away, the company’s top executive told reporters Monday.
General Motors Corp. CEO Fritz Henderson is still holding out hope that the company can restructure without court protection, but he says the tasks to complete before a June 1 government-imposed deadline are large.
The automaker, Henderson said, is looking at its operations country-by-country to determine where it might have file for bankruptcy, but he says a U.S. bankruptcy doesn’t necessarily mean that GM would file in other locations.
"Certainly the task that we have in front of us is large," Henderson said during a conference call to update the company’s restructuring efforts. "There is still an opportunity and still a chance for it to be done outside of a court process."
GM shares fell 13 cents, or 8.1 percent, to .48 in midday trading.
General Motors has received .4 billion in federal loans, and the government deadline to restructure or seek Chapter 11 protection is just over two weeks away. But the company must reach concessionary agreements with unions, persuade thousands of bondholders to exchange billion in debt for 10 percent of GM’s stock, cut thousands of dealers, close plants and lay off more salaried workers.
Under Chapter 11 reorganization, a company can stay in operation under court protection while sheds debts and unprofitable assets to emerge in a stronger financial position.
Also Monday, Henderson left open the possibility that GM would move its corporate headquarters out of Detroit. The company, he said, is looking at everything within its business.
"It’s not like we have that queued up at the top of our list," he said, adding that GM has a large number of people in Detroit and is proud to be here.
He would not comment about reports about Fiat Group SpA’s interest in getting 80 percent of GM’s European Opel operations, saying that any structure must address the needs of both partners.
Henderson said GM has an urgent need for funding from the German government, so any partner for its European operations would have to be suitable to the government.
"We have a need for funding, actually, in our European business, that’s important and urgent and the German government hasn’t indicated an interest in running our business," Henderson said. "We’re going to make sure that any partner we pick in this business is going to be suitable for them, so that if we need their support, we obviously want them to find any partner to be reasonable and acceptable.
Henderson cast doubt on reports that GM may sell its Latin American operations, saying they have consistently brought great returns to the company.
"This is a business that we know and like very much," he said.

and large CORP such as GM
with deregulation & job outsourcing
bankruptcy is on the rise

now the govt thinks they should enter into Chapter 11.Some even say that if they enter Chapter 11 they will never come out.If the business model is that weak, do you think they deserve to be in business anyway?

http://www.foxnews.com/politics/2009/03/08/republicans-gm-declare-bankruptcy/

I left GM 3 years ago at which time I froze my retirement. Shouldn’t GM have to settle with all of us before they come out of Chapter 11 to go back to their business as usual???

Serious thought-out replies only please. We don’t need to hear from the labor haters whom have never done two shittz of work in their lives. Thanks.

DETROIT – For General Motors Corp., the task at hand is so difficult that experts say a Chapter 11 bankruptcy filing is all but inevitable.
To remake itself outside of court, GM must persuade bondholders to swap billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business — all in three weeks.

I have stock in GM. What will happen to my stock if they are forced into chapter 11? do I just lose everything or do I still have my shares for the future company? thanks for your answers. I am new to stock trading.

Nov. 12 (Bloomberg) — General Motors Corp. rose 5.5 percent in New York trading after House Speaker Nancy Pelosi urged Congress to pass an industry bailout, embracing the premise that GM is too big to be allowed to fail.

In backing an emergency aid plan, Pelosi rejected calls to let the largest U.S. automaker collapse, saying she wanted to stop the loss of millions of jobs. Today, House Financial Services Committee Chairman Barney Frank proposed tapping billion from the 0 billion in bank-rescue funding.

“Trying to reorganize the auto industry in bankruptcy would be as close to reorganizing the whole U.S. economy as you could get,” said Alan Gover, a bankruptcy lawyer with White & Case LLP in New York. “The vast supply chain involves thousands of businesses, millions of existing jobs and just as many retirees, as well as whole communities and states.”

http://www.bloomberg.com/apps/news?pid=20601110&sid=a8oQkqyRcU6Y

Does that mean they are going out of business forever? Or will another company or the Gov. buy them out? What’s Chapter 11? I would hate to see GM gone forever, so tell me what does all this mean?

Most of Congress has decided that bailing them out is not worthwhile because it won’t work anyway and they’ll just need more money in a matter of months. I agree with this. Some in Congress point out that a car company cannot survive in bankruptcy because need for parts and service are on-going and who the heck is going to buy a car from a bankrupt company (unless the car is sold well undervalue)? I think that’s also correct. So here’s what I think is the only real solution: All 3 should merge and form one company which, of course, will mean lay-offs, but not nearly as bad as the alternative. This single company would still be competing against foreign auto makers, so there are no worries about a monopoly.

Does anyone else agree with me? If not, what do you see as the alternative? Remember — letting these companies go out of business means 2 – 3 million workers losing their jobs.
Please offer the alternative to what I’m suggesting and why yours is a good idea.
Dewey, I agree, but in the meantime these 3 auto makers are on the verge of going out of business. The CEOs of GM and Ford told Congress their companies would be out of business within a year unless they received a bail-out — which they didn’t receive. Don’t even get me started about their corporate jets — what a disgrace!