Here's an excerpt from a letter to the public by the editor of the Los Angeles Times announcing that their parent company, The Tribune Company, has filed for protection from creditors under Chapter 11 of the bnakruptcy laws. I've modified his statement parenthetically so that it might apply to any company encountering financial problems...

"This restructuring is in (our) best long-term interest. It will reduce pressure on our operating businesses, enabling us to pursue our vision of creating a sustainable, cutting-edge....company that is valued by our (stakeholders) and that plays a vital role in the communities we serve."

Hey, this bankruptcy thng sounds like a great idea. All those people who lent us money and extended us credit can take the big loss because we borrowed too much. They can afford it more than us. If it's a choice between our company going under or stiffing our creditors, that's an easy one...if it'll save out butts, spread the hurt around. I don't own any of their stock...do I? Who cares? It's the American way.

If you want to read the entire letter, which the publisher was probably told to write by the owner of The Tribune Company, the bottom-fishing private equity investor Sam Zell, go to http://www.latimes.com/business/la-f...,4109653.story If it makes you feel any better, Zell has been investing in troubled companies for decades. He buys them up, liquidates the good parts, declares bankruptcy to eliminate the debt he incurred to buy the companies, then walks away with millions. He takes great pride in his business model, even referring to himself as "The Gravedancer". In the case of The Tribune Company, he's structured the bankruptcy so that one of the most valued subsidiaries was kept out of the bankruptcy. It's the Chicago Cubs, Wrigley Field and the broadcast rights for their games. He's got a buyer and will put the best part of a billion dollars in his pocket when he sells the Cubs in a month or so at the same time he's stiffing the creditors and lenders to the parent company. That's how a really smart lawyer--which he is--can outsmart the bankruptcy laws. Make you feel better? Like I said...it's the American way.

I hate to disagree with you, but a lot of people are hurt by bankruptcies. The shareholders are wiped out. And the creditors not only include banks but a lot of small businesses, who now may have to lay off someone because of a major hit to income,

In my original post I was being facetious to an utlimate degree.

Originally Posted by Villages Kahuna

In my original post I was being facetious to an utlimate degree.

There is no such thing as a "good" bankruptcy," but it is a fact of business. When businesses give credit to each other, whether that be by net-30 or other payment terms, there is a risk of getting stuck with a bad debt. How much potential "bad debt" a business is willing to risk taking is a business decision.

Chapter 11 provides some flexibility to companies that have a chance of recovery, and if they recover there is the potential for long-term debt recovery. Many places in the world don't have a "Chapter 11" equivalent, and the only action is the receiver's tape being placed over the door.

Investors are always taking a chance. "Invest" is the classy term for "gamble," and all gambles are risky. You never invest/gamble any more than you can afford to lose, because the odds are always in the house's favor.

That's why courts handle bankruptcy. If the court sees there really is a potential for salvage of the business, and the plan for recovery offers downstream relief to more than taping the doors shut, then the plan goes forward.