Originally published in Newspaper Financial Executives Quarterly, April, May, June 1995, Volume 1, Issue 3.
By David J. Cook
Let’s take a guided tour through Plans of Arrangements and Disclosure Statements in Chapter 11 proceedings. This exercise is important in evaluating benefits under any Chapter 11 for purposes of voting on the plan, financial reporting in evaluating write-offs and collectability, and furthermore evaluating offers from brokers and buyers of claims that were solicited in the Texaco, Macy’s, Emporium, Mega-Foods, and Liquor Barn cases. This tour will also identify pitfalls and follies of many Chapter 11 plans which sometimes produce only questionable benefits. Recent studies indicate that most confirmed Chapter 11s produce a paltry dividend averaging about $.10/dollar, and even confirmed Chapter 11s have a high rate of failure and default, foreclosing any likely recovery with further administrative expense.