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FROM: JUL-AUG 2009 ISSUE | BY PEGGY HOMAN, EDITOR
It is quite the year for historic bankruptcy filings. Corporate giants such as General Motors Corp., Chrysler Corp., and AbitibiBowater Inc. all filed for protection from creditors in recent months with a view to reinventing themselves as profitable entities. To this end, GM has even redefined the company’s overall mission as “reinvention.”
Back in April forestry giant AbitibiBowater, one of Canada’s oldest companies and the world’s biggest producer of newsprint, filed for Chapter 11 protection in the United States and sought similar protection under Canada’s Companies’ Creditors Arrangement Act (CCAA). And despite numerous efforts to make Canadian titan Air Canada profitable, the company is heading into a stormy future and may file under the CCAA for the second time in six years.
Another high profile Chapter 11 filing was made in May when Phoenix Coyotes owner Jerry Moyes started bankruptcy proceedings. According to court documents, the National Hockey League team currently has more than $224-million in liabilities and has lost nearly $400-million since moving from Winnipeg in 1996. Although the filing was made in Arizona, the fallout is affecting creditors on both sides of the border.
And then there are the epic failures of GM and Chrysler. In June the U.S., Canadian, and Ontario governments bailed out GM with an unprecedented $40-billion (U.S.) in loans. But while these filings and plans for massive restructurings have sent shockwaves through the economy, some argue there is a bright side to seeking bankruptcy protection. Robert Milton, former CEO of Air Canada, has said that the process of filing under the CCAA was “the most liberating thing that had ever happened to the company” and pulled the airline back from the brink of collapse.
Whether or not you agree that failure can spark reinvention and ultimately lead to financial success, one thing is certain. Corporate restructurings and the crucial decision to seek bankruptcy protection require the sound advice of highly competent finance professionals. Given the current tempests facing businesses large and small, this issue’s two features (Beyond the Storm and Restructuring for the Future) focus on the role of CGAs and business valuators in assessing financially troubled companies and in exploring alternatives to liquidation.
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