Fewer Restructurings and More Liquidations in Southern District of New York

Under the theory that old news is still good news, I’m pleased to report that Collier International Business Insolvency Guide expert author Stephen Z. Starr, of Starr & Starr PLLC, was quoted in the January 11 New York Magazine Intelligencer column by Peter Savodnik.
 
The article “Final Chapter: Fewer Restructurings, More Liquidations in Bankruptcy Court” discusses how the number of filings--139 chapter 11 filings in the last three months of 2008 compared with 30 filings in the previous year (almost a 5 fold increase)--actually does not reflect a much bleaker economic environment in which businesses are liquidating due to the scarcity and cost of reorganization financing.
 
“In recessions past, bankruptcy lawyers say, Chapter 11 was meant to buy businesses a little time to pay off their debts, restructure their operations, and stay afloat. That’s not what’s happening this time. ‘In this cycle, we are seeing fewer restructurings and more liquidations or quick sales,’ says Saul Burian, managing director of the investment bank Houlihan Lokey Howard & Zukin. This is probably because reorganization costs money—from $10,000 (mom-and-pop pizzeria) to $1.4 billion (Enron)—and troubled businesses can’t afford it.”
 
“Bankrupt businesses are leery of talking about liquidation for fear of frightening off potential investors. ‘We need to hold our cards close to our vest right now,’ says Jamie Lamm, head of the Ninth Avenue recording studio Fearless Music, Inc., which filed for Chapter 11 in December. ‘It’s definitely a restructuring, but we’re not sure if it’s with an asset purchase involved or what.’ If the company’s assets are mostly their creative talent, they might just liquidate right off the bat. `Consultants, financial planners, design companies, graphic design, web design, advertising—they’re vulnerable and choosing not to pursue Chapter 11,’ says bankruptcy attorney Stephen Starr.”
 
Lexis author Stephen Z. Starr will discuss the article and share his unique insights as partner of a New York City-based boutique firm catering to both consumer and commercial bankruptcy law clients in an upcoming LexisNexis Bankruptcy Law Center Podcast interview. Stay tuned.
 
You can read the entire article here:
 
For more information about Stephen Z. Starr, click here.
For more information about Starr & Starr PLLC, click here.
 
Stephen Starr is author of the chapter on Turkish insolvency law for the Collier International Business Insolvency Guide.
 
To learn more about the publication, click here.