Do you want a Slurpee with that petition?
The Washington Post reports that changes to the Bankruptcy Code which go live on October 17 may result in a number of companies filing before then:
“I think we’ll see some major corporate bankruptcies between now and October as companies choose to avoid dealing with the new (bankruptcy) bill,” said Robert Keach, co-chairman of the Business Reorganization Committee at the American Bankruptcy Institute and chairman of the bankruptcy and restructuring practice group at law firm Bernstein Shur in Portland, Me.
“What you may find is that companies who were going to file (for bankruptcy) anyway will file earlier to avoid what they consider the more difficult provisions of the new bill,” he said.
Among other things, the new law limits potential extensions of time that a debtor can file an exclusive plan of reorganization; it will be limited to 18 months. A good summary of the changes is provided by the Orrick firm here. Limits on executive compensation and retention arrangements could also enter into the calculus.
One company that may fit this description is on our radar in the Midwest: Northwest Airlines. Minnesota Public Radio reports on this. Part of the NWA bankruptcy threat is playing out in negotiations with mechanics, who will likely strike as soon as this weekend.
Because of these changes, observers think some Chapter 11 reorganizations may end up as Chapter 7 liquidations. According to the Washington Post:
“Under the new code, it’s less likely that they can survive after Chapter 11” as opposed to undergoing a liquidation, said Edward Altman, director of the credit and debt markets program of the Salomon Center at New York University Stern School of Business, who expects to see a small spike in the number of bankruptcies from companies that are facing a financial crunch.
The fresh start may become the final act.