| Chapter 11
Here's another thing about Chapter 11 bankruptcy, a/k/a, debtor in possession. In normal times, once a company files under Ch. 11, it is considered a good risk for loans because it has less debt than before. The bankruptcy judge can manage the process to make sure there isn't a default on the new debt. But, now companies can't get post Ch. 11 loans. Marvyn's and Linens 'n' Things have had to liquidate because they couldn't get new money. Circuit City may have to liquidate too. It would be difficult to get financing, especially of such scope for the auto companies in the present financial climate. If the companies had no choice but to file under Ch. 11, it could cause a race to the courthouse. Since post bankruptcy filing money is scarce, the first company to file may get enough to survive, the 2nd and 3rd may not get any and have to liquidate. The irony is that the healthiest company may be the one that is least likely to survive.
So, why can't the feds lend them money after filing Ch. 11? Bankruptcy looks so bad to the (un)buying public that much damage would be done. Would suppliers who are owed money get payments in time before they went under? Coordinating this could take a lot of time, compounding the damage.
I suppose the companies could look into some state common law remedies that resemble bankruptcy, but may not have that toxic name. Though such remedies may survive in some states, nobody uses them because the federal remedy works better.
And, 'hawk, you are indeed fortunate to be married to a lawyer, and if I didn't have to do stuff to get ready for T'giving, I'd explain why in 1,000 words or more.
Gene
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