Bankruptcy Survival

Of the large, public companies that seek to remain in business through bankruptcy reorganization, only 70% succeed. The assets of the other 30% are absorbed into other businesses. Success is important both because it is efficient and it preserves jobs, communities, supplier and customer relationships, and tax revenues. This Article reports the findings of the first comprehensive study of the division into successful and failed reorganizations. Eleven conditions best predict companies’ survival prospects. First, a company that even hints in the press release announcing its bankruptcy that it intends to sell its business is highly likely to fail. Second, reorganizations assigned to more experienced judges are more likely to succeed. Third, companies headquartered in isolated geographical areas are more likely to fail. Fourth, companies that report greater shareholder equity are more likely to fail. Fifth, companies with creditors’ committees are more likely to fail. Sixth, companies with DIP loans are more likely to succeed. Seventh, companies that prepackage or prenegotiate their plans are more likely to succeed. Eighth, companies are more likely to succeed if interest rates are low in the pre-filing period. The final three conditions are that companies are more likely to succeed if they are larger, if they are manufacturers, and if they have positive operating income prior to filing. System participants can improve survival rates by shifting cases to more experienced judges and perhaps also by greater attention to the decisions to appoint committees, prenegotiate plans, obtain DIP loans, and publicly seek alliances

Bankruptcy Fire Sales

For more than two decades, scholars working from an economic perspective have criticized the bankruptcy reorganization process and sought to replace it with market mechanisms. In 2002, Professors Douglas G. Baird and Robert K. Rasmussen asserted in The End of Bankruptcy, an article published in the Stanford Law Review, that improvements in the market for large, public companies had rendered reorganization obsolete. Going concern value could be captured through sale. This article reports the results of an empirical study comparing the recoveries in bankruptcy sales of large public companies in the period 2000-2004 with the recoveries in bankruptcy reorganizations during the same period. We find that, controlling for company values reported at case commencement, pre-filing operating profits, and post-filing operating profits, the recoveries in reorganization cases are more than double the recoveries from going concern sales. We attribute the low recoveries in sale cases to continuing market illiquidity and the corruption of the bankruptcy process by competition among bankruptcy courts for large, public company cases. We also find that bankruptcy recoveries are higher in years when merger and acquisition activity is higher for reasons other than high stock prices. Lastly, we find that bankruptcy recoveries are higher when debt capacity in the debtor\u27s industry is lower - the opposite effect predicted by Professors Andrei Shleifer & Robert W. Vishny in their landmark article in 1992

Delaware Bankruptcy: Failure in the Ascendancy

In 1990, the United States Bankruptcy Court for the District of Delaware - then a one-judge backwater - began competing for big bankruptcy cases. In six years, that court achieved a near monopoly. In 2000, LoPucki and Kalin discovered that 42% of the companies filing in Delaware during that six year period of ascendency refiled bankruptcy within five years of their emergence, as compared with only 6% of those filing in courts other than Delaware and New York. In a later study, we found the (1) the failure of the companies reorganized in Delaware during the period of ascendency was robust across several measures of failure and (2) the Delaware filers were not different from the other court filers in any way that might account for the higher refailure rates. In a review of LoPucki\u27s book Courting Failure (University of Michigan Press 2005), An Efficiency-Based Explanation for Current Corporate Reorganization Practice, 73 University of Chicago Law Review 425 (2006), Professors Kenneth Ayotte and David A. Skeel, Jr. came to Delaware\u27s defense with an economic model and new empirical evidence. They argued, in essence, that companies with worse prospects for reorganization chose Delaware reorganization because it was cheaper. Because this group of companies was weaker, creditors put them on a short[er] leash, by saddling them with high debt levels. The higher rate of refiling that resulted was nevertheless efficient because refiling costs were low. In this essay we respond that the Ayotte-Skeel model is based on the assumption of a selection effect for which there is neither a shred of empirical evidence nor even a variable proposed for measurement. We demonstrate that it is mathematically impossible for the cost savings from Delaware\u27s shorter bankruptcies to offset the cost of so many second bankruptcies. We also note that the Ayotte-Skeel model leads to several predictions in conflict with the empirical evidence. We argue that refailure is costly and propose an empirical approach to quantify those costs. We praise Ayotte and Skeel\u27s discovery that the EBITDA of firms emerging from Delaware bankruptcy was not significantly different from the EBITDA of firms emerging from bankruptcy in other courts during the period of ascendency. We agree that their findings suggest leverage played a greater role in the failure of the Delaware companies than we had previously thought. Lastly, we respond to Ayotte and Skeel\u27s argument that DIP lenders, other creditors, and bankruptcy courts can prevent the case placers from using their leverage over the bankruptcy courts to externalize costs. The DIP lenders will not prevent the externalization because they are themselves case placers. Other creditors cannot prevent the externalization because no procedural means exist by which they could do so. The bankruptcy courts cannot prevent the externalization because the case placers avoid courts that attempt to place limits on them

Why Are Delaware and New York Bankruptcy Reorganizations Failing?

Before 1990, the United States Bankruptcy Court for the District of Delaware was a sleepy backwater. During the entire decade of the 1980s, Phoenix Steel-whose only plant was located in Delaware-was the only large, public company to file there. In 1990, two large, public companies-Continental Airlines and United Merchants and Manufacturers-filed in Delaware. They constituted 7% of the twenty-nine large, public companies filing in the United States that year. From 1990 to 1996, Delaware\u27s market share steadily increased to 87% (thirteen of fifteen cases).\u27 In just seven years, Delaware had become the bankruptcy reorganization capital of the United States. Lynn LoPucki and Sara Kalin recently suggested that the Delaware bankruptcy court\u27s spectacular success in winning market share may have been accompanied by an equally spectacular failure in the reorganizations that the court processed during those years. Their suggestion was based principally on an empirical finding that by February 2000, nine of the thirty companies (30%) emerging from bankruptcy reorganization in Delaware from 1991 to 1996 had filed bankruptcy a second time. Excluding New York-which had a refiling rate almost as high as Delaware\u27s (23%)-only four of the seventy-five large, public companies (5%) emerging from bankruptcy in other courts during the same period filed a second time. LoPucki and Kalin\u27s study made only a preliminary attempt to discover the reasons for Delaware\u27s higher refiling rate. But, as their findings on the disparity of refiling rates gained wide publicity, bankruptcy scholars, lawyers, and judges offered a variety of possible explanations. Most of those explanations sought to exonerate the because it ignores distressed debtors that fail without refiling. Some argued that the firms filing in Delaware might have been more difficult to reorganize because they had more complex capital structures or more serious business problems. Others argued that Delaware\u27s high refiling rate was economically efficient, implying that other courts should ease their standards and accept higher refiling rates. Still others argued that it was impossible to know whether Delaware was doing a worse job without knowing the individual reasons that each reorganization failed

Why are Delaware and New York Bankruptcy Reorganizations Failing?

Why are Delaware and New York Bankruptcy Reorganizations Failing

Delaware Bankruptcy: Failure in the Ascendancy

In 1990, the United States Bankruptcy Court for the District of Delaware - then a one-judge backwater - began competing for big bankruptcy cases. In six years, that court achieved a near monopoly. In 2000, LoPucki and Kalin discovered that 42% of the companies filing in Delaware during that six year period of ascendency refiled bankruptcy within five years of their emergence, as compared with only 6% of those filing in courts other than Delaware and New York. In a later study, we found the (1) the failure of the companies reorganized in Delaware during the period of ascendency was robust across several measures of failure and (2) the Delaware filers were not different from the other court filers in any way that might account for the higher refailure rates. In a review of LoPucki\u27s book Courting Failure (University of Michigan Press 2005), An Efficiency-Based Explanation for Current Corporate Reorganization Practice, 73 University of Chicago Law Review 425 (2006), Professors Kenneth Ayotte and David A. Skeel, Jr. came to Delaware\u27s defense with an economic model and new empirical evidence. They argued, in essence, that companies with worse prospects for reorganization chose Delaware reorganization because it was cheaper. Because this group of companies was weaker, creditors put them on a short[er] leash, by saddling them with high debt levels. The higher rate of refiling that resulted was nevertheless efficient because refiling costs were low. In this essay we respond that the Ayotte-Skeel model is based on the assumption of a selection effect for which there is neither a shred of empirical evidence nor even a variable proposed for measurement. We demonstrate that it is mathematically impossible for the cost savings from Delaware\u27s shorter bankruptcies to offset the cost of so many second bankruptcies. We also note that the Ayotte-Skeel model leads to several predictions in conflict with the empirical evidence. We argue that refailure is costly and propose an empirical approach to quantify those costs. We praise Ayotte and Skeel\u27s discovery that the EBITDA of firms emerging from Delaware bankruptcy was not significantly different from the EBITDA of firms emerging from bankruptcy in other courts during the period of ascendency. We agree that their findings suggest leverage played a greater role in the failure of the Delaware companies than we had previously thought. Lastly, we respond to Ayotte and Skeel\u27s argument that DIP lenders, other creditors, and bankruptcy courts can prevent the case placers from using their leverage over the bankruptcy courts to externalize costs. The DIP lenders will not prevent the externalization because they are themselves case placers. Other creditors cannot prevent the externalization because no procedural means exist by which they could do so. The bankruptcy courts cannot prevent the externalization because the case placers avoid courts that attempt to place limits on them

GOurmet: A tool for quantitative comparison and visualization of gene expression profiles based on gene ontology (GO) distributions

BACKGROUND: The ever-expanding population of gene expression profiles (EPs) from specified cells and tissues under a variety of experimental conditions is an important but difficult resource for investigators to utilize effectively. Software tools have been recently developed to use the distribution of gene ontology (GO) terms associated with the genes in an EP to identify specific biological functions or processes that are over- or under-represented in that EP relative to other EPs. Additionally, it is possible to use the distribution of GO terms inherent to each EP to relate that EP as a whole to other EPs. Because GO term annotation is organized in a tree-like cascade of variable granularity, this approach allows the user to relate (e.g., by hierarchical clustering) EPs of varying length and from different platforms (e.g., GeneChip, SAGE, EST library). RESULTS: Here we present GOurmet, a software package that calculates the distribution of GO terms represented by the genes in an individual expression profile (EP), clusters multiple EPs based on these integrated GO term distributions, and provides users several tools to visualize and compare EPs. GOurmet is particularly useful in meta-analysis to examine EPs of specified cell types (e.g., tissue-specific stem cells) that are obtained through different experimental procedures. GOurmet also introduces a new tool, the Targetoid plot, which allows users to dynamically render the multi-dimensional relationships among individual elements in any clustering analysis. The Targetoid plotting tool allows users to select any element as the center of the plot, and the program will then represent all other elements in the cluster as a function of similarity to the selected central element. CONCLUSION: GOurmet is a user-friendly, GUI-based software package that greatly facilitates analysis of results generated by multiple EPs. The clustering analysis features a dynamic targetoid plot that is generalizable for use with any clustering application

Public Art and Local Civic Engagement, Final Report

Executive Summary This report compares the cultural value of two public artworks – Alex Hartley’s durational, dispersed Nowhereisland and Damien Hirst’s permanent, single-sited Verity that arrived in Ilfracombe in 2012. It assesses their contribution to reflective and engaged citizenship, local identity, regeneration, cultural tourism and legacy. The study responded to a methodological gap by developing a group-based participatory method - the visual matrix - that enables participants to express affective, aesthetic and cognitive experience of public art. The study compares methods and findings and triangulates with interviews and media analysis. Part 1 discusses the research methods and compares results. Part 2 discusses theoretical and conceptual foundations and analysis of the visual matrix, drawing on Alfred Lorenzer’s depth hermeneutics, the Deleuzian metaphor of rhizomatic thinking, Wilfred Bion’s conceptualization of reverie and containment and Donald Winnicott’s theorisation of transitional phenomena. In Part 3 benefits and limitations of the methodologies and their applications are discussed. It concludes that the visual matrix is a highly effective method of understanding participants’ experiences of public art because it is led by imagery and affect. The shared context and associative thinking of the visual matrix enables participants to articulate responses that people often find difficult to express. It produces strikingly different results to methods that rely on discourse, and is able to account for emotional and aesthetic reception of an artwork as well as the social processes it sets in motion and otherwise intangible aspects of impact and legacy. It is particularly useful for researching or evaluating complex, durational projects with multiple entry points. This study therefore has significant implications for how such artworks can be evaluated to capture dimensions that are not easily assessed by other methods and so inform the commissioning of public art