Chapter 11 Not Perfect but Better than the Alternative

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Oct 2005

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ABI Journal, Vol. XXIV, No. 8, p. 1, October 2005

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Winston Churchill once said: "Many forms of
government have been tried, and will be tried in this world of sin and
woe. No one pretends that democracy is perfect or all-wise. Indeed, it
has been said that democracy is the worst form of government except all
those others that have been tried from time to time."<a href="#2" name="2a">2</a>

And so it is with chapter 11 of the Bankruptcy Code. Chapter 11 may
not be a perfect corporate restructuring vehicle, but it is far better
than any alternative yet posited in the debate that has raged over
chapter 11's efficacy since its enactment in 1978.<a href="#3" name="3a">3</a> Indeed, in our view, although
the basic structure of chapter 11 could be fine-tuned, it nonetheless
remains the archetypal corporate restructuring statute against which all
other putative alternatives should be adjudged.<a href="#4" name="4a">4</a>

In this sometimes-heated debate about the efficacy of chapter 11,
points of view have ranged from those advocating replacing chapter 11
with some sort of private contract-based restructuring system (the
advocates of which we have dubbed as the "efficientists") to those who
believe that the prospects for debtor rehabilitation should be enhanced
(whom we call the "rehabilitationists"). Yet none of the proposed
replacements for, or redefined roles of, chapter 11 properly reflect the
economic realities of the modern restructuring markets.

The rehabilitationists, represented most famously by Harvey Miller,
lament the passing of an era in which financially distressed companies
(historically, railroads) were rehabilitated, typically with some sort
of change in ownership.<a href="#5" name="5a">5</a> Miller and his fellow rehabilitationists
thus have decried the increasing frequency and rise in importance of
§363 sales, which, they claim, has come at the expense of
traditional restructurings.<a href="#6" name="6a">6</a> They have ascribed this rise in the
predominance of asset sales to the growing power of secured and
debtor-in-possession (DIP) lenders and the rise of special-interest
legislation amending chapter 11 to be less debtor-friendly and more
receptive of certain special interests.<a href="#7" name="7a">7</a> Rehabilitationists such as Miller assert
that this evolution away from classic "debtor rehabilitation" poses
systemic dangers, including failure to maximize value and increased
numbers of piecemeal liquidations that destroy jobs and reduce industry
competition.<a href="#8" name="8a">8</a>

Efficientists such as Profs. Baird and Rasmussen have also posited
that the era of chapter 11 and "traditional" debtor reorganizations may
be drawing to a close—but for a very different reason. They assert
that larger economic forces have caused "going concern" value to be less
common, which in turn makes preserving the historic debtor entity less
viable, thereby largely rendering (in their view) chapter 11
obsolete—and best replaced by a private-market
approach.<a href="#9" name="9a">9</a>

But many of Baird's and Rasmussen's conclusions simply do not comport
with the real, messy world.<a href="#10" name="10a">10</a> For example, they state that "[t]he
traditional conception of corporate reorganizations starts with the
belief that when a firm is in distress, control rights will not be
vested in the hands of someone who exercises them
sensibly."<a href="#11" name="11a">11</a> In
other words, Baird and Rasmussen view chapter 11 as resting on the
assumption that it is needed because the residual owner will not act
rationally.<a href="#12" name="12a">12</a>
They assert that the single residual owner will act rationally because
that is the bedrock assumption of standard microeconomic
theory.<a href="#13" name="13a">13</a> But
things aren't that simple. It is our experience that there is no single
residual owner in a large, complex chapter 11 case.<a href="#14" name="14a">14</a> Debt structures tend to be
very complex and subject to potential challenge.<a href="#15" name="15a">15</a>

<h4>Chapter 11 Fostered the Rise of the Modern Restructuring
Markets</h4>

In having analyzed their views, we believe that there is, to borrow a
phrase, a "third way" to view both the purpose and efficacy of chapter
11.<a href="#16" name="16a">16</a> We believe
that chapter 11 continues to function well (albeit not perfectly) as the
component of a larger restructuring market that efficiently processes
market failure as the process of last resort. Indeed, chapter 11's
inherent flexibility has fostered new means of preserving going-concern
value in complex corporate transactions. The result is a restructuring
market that is a quantum leap from the state of affairs when Congress
enacted the current Bankruptcy Code in 1978. Indeed, chapter 11 is but
one, albeit a critical, part of a broader restructuring market that also
includes a vast number of out-of-court workouts because it serves as a
critical court-supervised market of last resort when a consensual deal
is not made.<a href="#17" name="17a">17</a>
This often brutally competitive restructuring market has but one goal in
the final analysis, whether in an out-of-court setting or in chapter 11:
maximizing creditor recoveries.

We see three primary reasons for the primacy of maximizing creditor
recoveries. First and foremost, the U.S. economy is market-driven. In
addition, restructuring market participants (comprising both chapter 11
and the out-of-court markets) naturally enough seek the highest returns
possible for their investments.<a href="#18" name="18a">18</a> Second, as an entity enters the zone of
insolvency, the fiduciary duties ordinarily owed by the board of
directors and management to shareholders extends to
creditors.<a href="#19" name="19a">19</a>

Finally, Congress, in enacting the Bankruptcy Reform Act, cited
maximizing creditor recoveries as a major goal of chapter
11.<a href="#20" name="20a">20</a> Indeed, the
very structure of the Code confirms that Congress intended chapter 11 to
function flexibly, with "debtor rehabilitation" being only one among
several paths to exiting chapter 11.<a href="#21" name="21a">21</a>

The importance of the interplay between chapter 11 and the broader
restructuring markets cannot be overemphasized. Yet Miller ignores the
importance—and the role—of out-of-court workouts, thereby
giving short shrift to the broader restructuring milieu in which chapter
11 operates. Baird and Rasmussen, on the other hand, believe that
out-of-court workouts do constitute an important segment of the
restructuring markets. But they go too far in concluding that private,
out-of-court workouts can entirely supplant chapter 11.<a href="#22" name="22a">22</a> We believe that the evidence
shows that out-of-court workouts now dominate the restructuring markets
because of the presence of chapter 11 as a restructuring alternative of
last resort.<a href="#23" name="23a">23</a>
This presence (simply as the logical alternative to a private workout)
normatively influences the markets because every market participant
knows the price of failing to reach a consensual deal out of
court—a chapter 11 case.<a href="#24" name="24a">24</a>

The modern-day restructuring market accomplishes the broader goals of
chapter 11 by preserving going-concern value when such value is present,
whether by a strategic sale of businesses (and their asset-based, human
and/or financial capital) or by financially restructuring the historic
corporate entity, in either case efficiently processing capital from the
deathbed of a moribund business entity to the cradle of its highest and
best use. It is on this basis that we believe that the development of
the modern restructuring market has made an asset sale and a traditional
reorganization economically equivalent.<a href="#25" name="25a">25</a>

As we discuss in more detail in our forthcoming article, the evidence
of this economic equivalence (and concomitant arbitrage opportunities)
is compelling.<a href="#26" name="26a">26</a>
For example, corporate debtors generally change ownership through some
sort of recapitalization when their respective plans are
consummated.<a href="#27" name="27a">27</a>
Moreover, by virtue of the rise of the secondary debt markets, the
membership of each class of creditors receiving equity generally does
not consist of the original creditors in that group. In other words,
many (if not most) of the creditors receiving equity had acquired their
claims in the distressed-debt markets.<a href="#28" name="28a">28</a> By so doing, they had effectively
purchased the prospect of receiving the reorganized debtor's
equity.<a href="#29" name="29a">29</a>

Chapter 11's structure, which allows either the sale of the business
as a going concern or its reorganization, thus presents the debtor and
its creditor constituencies with an option: Sell to a willing buyer or
reorganize, with ownership transferred to new equity-holders—at a
price that tends to equal the consideration of any sale alternative. The
question is which course to take. In our experience, there are a number
of factors to consider:

<ul>
<li>The speed with which the acquisition needs to occur. A
§363 asset sale is usually faster than either a sale through, or a
stock-for-debt transfer pursuant to, a confirmed reorganization plan.
The length of time in chapter 11 may be minimized in the case of a
stock-for-debt exchange by engaging in either a prepackaged or
prearranged plan. But in either case, the deal is likely to be in the
public eye longer than in the case of a §363 asset sale.

</li><li>Whether there is a potential competitor planning to bid for the
target entity. If one potential purchaser already has a commanding
debt position, a competitor coming to the proposed sale at a later point
could potentially work a sweeter deal as a stalking-horse bidder in a
§363 asset sale. On the other hand, purchasing a commanding debt
position could preemptively dissuade other potential acquirors from
actively pursuing the target.

</li><li>Need for the existing historic entity to
continue.<a href="#30" name="30a">30</a>

</li><li>Need to shed legacy costs and non-performing
assets.<a href="#31" name="31a">31</a>

</li><li>The buyer's tolerance for minority holders of
stock.<a href="#32" name="32a">32</a>

</li></ul>

<h4>Conclusion</h4>

The death of a failed business should not be seen as a necessarily
"bad" outcome.<a href="#33" name="33a">33</a>
Such failures merely manifest that great engine of the American economy,
"creative destruction."<a href="#34" name="34a">34</a> In other words, business failure is
merely one part (along with successful businesses) of good old-fashioned
American capitalism built upon a foundation of efficient markets. Dying
businesses are thus a natural part of a dynamic, capitalist
economy.<a href="#35" name="35a">35</a>

Editor's Note: This is a "short form" article based on a
much longer piece that will be published in the forthcoming edition
of The Journal of Bankruptcy Law and Practice. We thank the
authors for allowing us to give you, our readers, an advance look at
what they have to say.

<hr>
<h3>Footnotes</h3>

<a href="1">1</a> Messrs. Sprayregen,
Higgins and Friedland are attorneys with the Restructuring Group of
Kirkland & Ellis LLP. <a href="#1a">Return to article</a>

<a name="2">2</a> James, Robert Rhodes,
ed., "Winston Churchill, Speech, House of Commons, Nov. 11, 1947," 7
Winston S. Churchill: His Complete Speeches, 1897-1963, 7566
(1974). <a href="#2a">Return to article</a>

<a name="3">3</a> ABI held a "Symposium on
the Code After 25 Years: 1978-2003" in October 2003, and subsequently
devoted an issue of the ABI Law Review to the topic. One of the
recurring questions many of the symposium participants addressed is how
well (or how poorly, as the case may be) chapter 11 is doing its job.
See 12 ABI Law Review 1. <a href="#3a">Return to
article</a>

<a name="4">4</a> In our longer article, we
briefly discuss several potential "fixes." We also discuss a number of
provisions in the recently enacted Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA) that we believe may materially
detract from the efficacy of chapter 11 at the expense of overall
restructuring market efficiency. <a href="#4a">Return to article</a>

<a href="5">5</a> Miller and Weisman, "Does
Chapter 11 Reorganization Remain a Viable Option for Distressed
Businesses for the Twenty-first Century?," 78 Am. Bankr. L.J. 153 (2004)
(discussing the 19th century origins of modern restructuring law). <a href="#5a">Return to article</a>

<a name="6">6</a> Miller presented an
unpublished paper on this subject at a recent conference. Miller,
Trepper, Baker and Turetsky, "Debtor Dispossessed: The Rise of the
'Creditor-in-possession' and Chapter 11 Asset Sales: Does Chapter 11
Have a Future for Debtors?," (unpublished manuscript on file with
authors) at 1-2 (2004) (hereinafter, variously "Miller, et al.,"
"Miller" and the "Miller article"). He also gave an interview espousing
the views set forth in the Miller article. Miller and Porennan,
"Creditor in Possession," TheDeal.com at <a href="http://www.thedeal.com">http://www.thedeal.com</a>, (last visited
on Feb. 24, 2005) (Jan. 9, 2004). <a href="#6a">Return to article</a>

<a href="7">7</a> Miller, et al., at 22-23.

<a href="#7a">Return to article</a>

<a name="8">8</a> Id. <a href="#8a">Return to article</a>

<a name="9">9</a> See, e.g., Baird,
"The New Face of Chapter 11," 12 Am. Bankr. L.J. 69, 71-72 (2004); Baird
and Rasmussen, "Chapter 11 at Twilight," 56 Stan. L. Rev. 673 (2003);
Baird and Rasmussen, "The End of Bankruptcy," 55 Stan. L. Rev. 751
(2002); Baird, "Bankruptcy's Uncontested Axioms," 108 Yale L.J. 573, 576
(1998); Baird and Rasmussen, "Chapter 11 at Twilight;" Baird and
Rasmussen, "The End of Bankruptcy;" Baird, "Bankruptcy's Uncontested
Axioms," 108 Yale L.J. 573, 576 (1998). Baird and Rasmussen, "Chapter 11
at Twilight" at 699; Baird and Rasmussen, "The End of Bankruptcy" at
788. <a href="#9a">Return to article</a>

<a name="10">10</a> Miller, as Baird and
Rasmussen themselves have noted, has criticized them in particular over
not having descended from the ivory tower to participate in the rough
and tumble of the day-to-day restructuring market. Miller, "Harvey's
Outburst: A Rejoinder to Professor White's Comment," 69 Am. Bankr. L.J.
481, 483 (citing Warren, "Bankruptcy Policymaking in an Imperfect
World," 92 Mich. L. Rev. 336, 339 (1993)). Others have also generally
criticized efficientists on this same point. Lubben, "Some Realism
Absent Reorganization: Explaining the Failure of Chapter 11 Theory," 106
L. Rev. at 267 (2001); Baird, "Uncontested Axioms," supra note 9
at 588 n. 44. <a href="#10a">Return to article</a>

<a name="11">11</a> Baird and Rasmussen,
"The End of Bankruptcy," supra note 9 at 779. <a href="#11a">Return to article</a>

<a name="12">12</a> LoPucki, "The Nature of
the Bankrupt Firm: A Reply to Baird & Rasmussen's The End of
Bankruptcy," 56 Stan. L. Rev. 645 (2003) at 658 n. 79. <a href="#12a">Return to article</a>

<a name="13">13</a> Baird and Rasmussen,
"Four (or Five) Easy Lessons from Enron," 55 Vand. L. Rev. 1787, 1807
(2002). <a href="#13a">Return to article</a>

<a name="14">14</a> Consider the

Conseco chapter 11 case, in which there were two separate
confirmed chapter reorganization plans—one reorganizing plan for
Conseco Inc., which had 33 separate classes of creditors, and a second
liquidating plan for Conseco Finance Corp., which had five classes of
creditors. See In re Conseco Inc., et al., Reorganizing Debtors'
Sixth Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the
U.S. Bankruptcy Code, (Bankr. N.D. Ill., Sept. 9, 2003) (Conseco
plan); In re Conseco Inc., et al., Finance Company Debtors' Sixth
Amended Joint Liquidating Plan of Reorganization Pursuant to Chapter 11
of the U.S. Bankruptcy Code, (Bankr. N.D. Ill., Sept. 9, 2003)
(Conseco Finance Corp. plan). In the Conseco plan,
creditors in 10 of the 33 classes received some form of equity in
satisfaction of their claims. In re Conseco Inc., et al.,

Reorganizing Debtors' Sixth Amended Joint Plan of Reorganization
Pursuant to Chapter 11 of the U.S. Bankruptcy Code, (Bankr. N.D. Ill.,
Sept. 9, 2003). LoPucki's research confirms our experience. LoPucki,
"The Nature of the Bankrupt Firm," supra note 12 at 659 n.87 (In
48 of 78 large public firm reorganizations occurring between 1991 and
1996, creditors/investors at more than one priority level shared
residual owner status such that they had materially adverse interests).
<a href="#14a">Return to article</a>

<a name="15">15</a> Nonetheless, many of
their observations about what is happening in the restructuring market,
and their application of principles of economics to the questions they
pose, have been immensely valuable in putting the contours of everyday
life in the restructuring market into much sharper focus (and in
permitting trenchant analysis and criticism of their theories). <a href="#15a">Return to article</a>

<a name="16">16</a> The Columbia
Encyclopedia (6th ed. 2001), <a href="http://www.bartleby.com">http://www.bartleby.com</a>, April 19,
2005 ("In 1997...[Blair]...moved quickly to implement a "'third-way
program'" in the wake of the landslide election that returned the Labour
Party to power in Great Britain after a nearly 20-year absence from
power). <a href="#16a">Return to article</a>

<a name="17">17</a> See Brubaker and
Klee, Debate at 274 and n. 3 (citing Wruck, "Financial Distress,
Reorganization and Organization Efficiency," 27 J. Fin. Econ. 419 (1990)
("We think it's appropriate, in judging the success of chapter 11, to
focus primarily not on what happens in chapter 11, but what happens
outside chapter 11. The preferred means of responding to financial
distress and default is a negotiated resolution, without resort to
bankruptcy. And, at least half the time, those negotiations produce a
successful, consensual, out-of-court deal with very low direct and
indirect costs that deplete the value of the firm")). <a href="#17a">Return to article</a>

<a name="18">18</a> See, e.g.,
Drummond, "Hedge Funds: Value or Vultures, They Play a Critical Role,"
Fin. Times, 2005 WLNR 3714483 (March 10, 2005) (describing how
distressed debt and similar funds work). <a href="#18a">Return to
article</a>

<a name="19">19</a> Geyer v. Ingersoll
Publications Co., 621 A.2d 784, 787 (Del. Ch. 1992) (recognizing
that upon corporate insolvency, creditors become beneficiaries of
directors' fiduciary duties). <a href="#19a">Return to article</a>

<a name="20">20</a> H.R. Rep. No. 595, 95th
Cong., 1st Sess. 220 (1977); see, also, NLRB v. Bildisco &
Bildisco, 465 U.S. 513, 527-28 (1984) ("(t)he fundamental purpose of
reorganization is to prevent a debtor from going into liquidation, with
an attendant loss of jobs and possible misuse of economic resources");

see, also, Miller, et al. at 3. <a href="#20a">Return to
article</a>

<a name="21">21</a> Had Congress not
intended to include liquidation as an acceptable type of reorganization
plan, then presumably all provisions dealing with liquidation would fall
within chapter 7, which is specifically titled "Liquidation." Courts
have thus long recognized that chapter 11 sales of going concerns and
other assets, often followed by a liquidating plan of reorganization,
were a quite likely outcome. See, e.g., In re Deer Park, 136 B.R.
815, 818 (BAP 9th Cir. 1992); see, also, Dickerson, "The Many
Faces of Chapter 11," 12 ABI Law Review 109, 114 (2003) (stating
that chapter 11 has been utilized as a tool for liquidation since the
enacting of the Code in 1978). <a href="#21a">Return to article</a>

<a name="22">22</a> Baird and Rasmussen,
"Chapter 11 at Twilight," supra note 9 at 699; Baird and
Rasmussen, "The End of Bankruptcy," supra note 9 at 786-88. Their
problem is that they want the broader market to subsume the chapter 11
segment. To do so would be akin to killing the goose that lays the
golden egg; the broader restructuring markets would not be nearly as
vibrant without chapter 11. See, infra, note 6. <a href="#22a">Return to article</a>

<a name="23">23</a> Brubaker and Klee,
"Debate: The 1978 Bankruptcy Code Is a Success," 12 ABI Law
Review 273, 274 and n.3 (2004) (citing Wruck, "Financial
Distress, Reorganization and Organization Efficiency," 27 J. Fin. Econ.
419 (1990)). In other words, the mere presence of chapter 11 as the
alternative of last resort has helped foster the development of a robust
out-of-court restructuring market. As Sherlock Holmes once observed
about the silence of a key player:

<blockquote>
It is of the highest importance in the art of detection to be able to
recognise out of a number of facts which are incidental and which are
vital... I would call your attention to the curious incident of the dog
in the night-time. 
The dog did nothing in the night-time. 
That was the curious incident.
</blockquote>
Doyle, "Silver Blaze," The Memoirs of Sherlock Holmes (1893) (Mr.
Holmes explaining to Inspector Gregory how he identified the horse
thief), available at <a href="http://www.bartleby.com">http://www.bartleby.com</a>. (last
visited on Apr. 28, 2005). <a href="#23a">Return to article</a>

<a name="24">24</a> There is also a
coercive element to the presence of chapter 11 as a component of the
broader restructuring markets. Its presence is rather like that of a
strict aunt at the family gathering ameliorating the behavior of a child
who might otherwise be inclined to misbehave. No rational market
participant, least of all a creditor in the position to call most, if
not all, of the shots in the out-of-court context, will want to
participate in a chapter 11 case when there is an economically viable
alternative. <a href="#24a">Return to article</a>

<a name="25">25</a> This economic
equivalence between an asset sale and a recapitalization merely
manifests the underlying concept that restructuring markets, like other
capital markets, are governed by the same economic forces, and thus may
be explained by the same economic theories. Brealey and Myers,
Principles of Corporate Finance 354-71 (7th ed. 2003) (discussing
structure of capital markets). Therefore, the process, from the debtor's
perspective, of determining whether an asset sale or recapitalization
will optimize creditor recoveries is essentially one of arbitrage, or
exploiting price differentials within a market. Id. at 204-08
(discussing arbitrage pricing model theory). <a href="#25a">Return to
article</a>

<a name="26">26</a> In our longer article,
we analyze a large number of large corporate bankruptcies to support
this conclusion. Our results are striking. We began with 22 sale cases
cited by Miller in support of his thesis that chapter 11 is no longer
fulfilling its role of rehabilitation. We found that these cases present
a variety of outcomes that fall into two basic groups distinguished
mainly by the intrinsic going-concern value of the operating businesses.
The first group comprised companies such as Bethlehem Steel, LTV Steel,
Pillowtex, National Steel and Burlington Industries, which really did
cease to exist in their historic form. Each of these companies and their
constituent business operations was no longer viable because there was
no real going-concern value worth preserving in their historic corporate
form. Their assets, which in many cases no longer constituted going
concerns, were recycled to different owners who could use them to
generate new going-concern value. The second group comprised companies
such as ANC Rental, Loews, Top-Flite, Budget Group and Polaroid, each of
which sold their core businesses to new owners that continued to operate
those businesses, making money (in most cases), employing workers
(whether the original workers or otherwise), creating value for their
shareholders (albeit new ones), paying taxes and generally continuing as
a corporate citizen. The sales and the concomitant liquidating plans
were facets of complex restructuring transactions that required the
aegis of chapter 11 to come to fruition. Finally, the evidence shows
that there are a large number of debtor cases that culminate in a
confirmed plan in which the historic business continues to operate,
albeit under new ownership. In each case, we found that, contrary to
Baird's and Rasmussen's hypothesis, the debtor retained an intrinsic
going-concern value. See, also, LoPucki, The Nature of the
Bankrupt Firm, supra note 12 (analyzing data that showed large
debtors being reorganized in the historic entity). <a href="#26a">Return
to article</a>

<a name="27">27</a> See, e.g., Regal
Cinemas, Loews Cineplex, Covad Communications Inc., Conseco Inc., NRG
Energy Inc., MCI Inc. (formerly WorldCom), Pacific Gas & Electric
Co., United Artists, Zenith, Chiquita and Exide Technologies; see,
also, LoPucki, The Nature of the Bankrupt Firm, supra note 26
at 647-48. <a href="#27a">Return to article</a>

<a name="28">28</a> Goldschmid, "More
Phoenix than Vulture: The Case for Distressed Investor Presence in the
Bankruptcy Reorganization Process," 2005 Colum. Bus. L. Rev. 191, 203-05
(2005) (vast majority of large debtor chapter 11 cases involve
distressed debtor traders that have influential or even outright
majority positions in debtors). <a href="#28a">Return to article</a>

<a name="29">29</a> This generalization is
not meant to disregard those market participants who arbitrage trade and
similar unsecured claims by purchasing them with the prospect of
receiving a recovery (usually in cash or easily liquidated property)
greater than the purchase price. <a href="#29a">Return to article</a>

<a name="30">30</a> The prime example of a
factor requiring the historic entity to continue existing is if the
debtor wishes to assume or assume and assign certain types of executory
contracts that cannot otherwise be assigned under applicable law. 11
U.S.C. §365(c)(1). <a href="#30a">Return to article</a>

<a name="31">31</a> Which will often
militate in favor of an asset sale vice the acquisition of the historic
entity. The debtor can carve out the nonperforming assets, which will
allow a sale of the core assets—either as assets alone, or as a
going-concern business. The buyer then has the ability to operate the
going-concern assets without being saddled with the cost of disposing of
the nonperforming assets. This circumstance has arisen in steel, textile
and coal mining company chapter 11 cases. But it is worth noting that
even purchasing assets out of a §363 sale will not guarantee that
the buyer will simply be able to walk away from the seller's legacy
costs unscathed. In the Cone Mills case, Wilbur Ross settled a
$59 million pension claim by the PBGC against ITG for a $4 million stake
in ITG and $500,000 in cash. Murray, "Cone Plan Clears," The Daily
Deal, 2005 WLNR 5939697 (Apr. 18, 2005) (settlement of PBGC claim
was part of confirmation of Cone Mills's liquidating chapter 11 plan).
<a href="#31a">Return to article</a>

<a name="32">32</a> Presumably, purchasing
assets in a §363 sale would ensure that there were no minority
holders. <a href="#32a">Return to article</a>

<a name="33">33</a> That is not to say that
one should be (and we are not) indifferent to the societal costs of
economic dynamism. Dealing with such societal impacts is really beyond
the scope of chapter 11 without a specific legislative mandate such as
that provided by §§507(a), 1113 and 1114. But it is safe to
say that an entirely private, contract-based restructuring market would
pay even less attention to the societal impact of dislocation costs than
chapter 11. <a href="#33a">Return to article</a>

<a name="34">34</a> Schumpeter,
Capitalism, Socialism and Democracy, 81, 130 (3d ed. 1950). <a href="#34a">Return to article</a>

<a name="35">35</a> Indeed, it is
interesting to note that it is very hard for any company to remain on
top. In 2004, only three companies that were part of the Dow Jones
Composite Index in 1959 remain part of that index. Dow Jones Industrial
Average History, found at <a href="http://www.djindexes.com/jsp/industrialAverages.jsp">http://www.djindex…;,
last visited on Oct. 11, 2004. <a href="#35a">Return to article</a>

Journal Authors

James H.M. Sprayregen

Jonathan P. Friedland

Roger J. Higgins

Journal Date

Saturday, October 1, 2005 - 12:00

Bankruptcy Rule

2005