California firm’s bankruptcy bid held up by lender objections

If administered correctly, a business or commercial reorganization through bankruptcy can be in some cases a boon for both debtors and creditors alike. However, these sorts of reorganizations have to be handled delicately as any objections by creditors can jeopardize the entire bankruptcy filing.

One bankruptcy concerning a California-based publisher has now been placed upon hold because lenders felt the reorganization plan “was orchestrated to benefit the company’s newest executives and their friends at a financial firm” retained to sell the publishing company. The lenders in question have apparently loaned the company as much as $41 million, which makes up a substantial part of the $100 million in debt claimed.

The objections are holding up a sale of the company for $60 million. The lenders preferred that the company’s assets be sold off piecemeal rather than be purchased in one entire transaction.

Bankruptcy reorganizations were put in place to prevent financially strapped companies from having to close their businesses entirely due to debts. Bankruptcy protection such as Chapter 11 can also allow the business to viably sell off its assets to another company that can make a go of the business. This can allow for employees to stay on rather than be laid-off, and it may even allow for hiring of more employees in future months.

Chapter 11 Bankruptcy can be an intricate and long drawn out process involving millions of dollars of assets, and that’s why it is essential to retain attorneys experienced in working with these types of filings. Part of the Chapter 11 process will involve negotiations with creditors – such negotiations as in the circumstance mentioned above requiring a great deal of care in handling.

Source: Examiner, “Lenders contest THQ bankruptcy plans,” by Joshua Rouse, Jan. 3, 2013 

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