From retailers to chemical companies to newspapers to casinos to racetracks — corporate bankruptcies are the order of the day. According to the Ottawa Citizen, US bankruptcy filings by large companies in the first quarter of 2009 were 78 per cent higher than the same period in 2008 and three times higher than in 2007. Here are a few recent and noteworthy bankruptcy filings.

Cable

March 27, 2009, Southern District of New York. St. Louis-based Charter Communications, the nation’s fourth-largest cable operator. The company, controlled by Microsoft co-founder Paul Allen hopes to reduce its debt by $8 billion and intends to operate and serve its subscribers as usual.

Sporting Goods

March 21, 2009, District of Delaware. Sportsman’s Warehouse, a Utah-based sporting goods retailer with more than 60 stores. The company intends to continue to operate 29 stores.

Resorts

March 19, 2009, Eastern District of Virginia. Greenbrier Hotel Corp, a unit of the transportation company CSX Corp and owner of the posh four-star Greenbrier resort, which has housed numerous presidents and royalty in West Virginia. The company lost its five-star rating in 2000 and since then has spent millions to expand its offerings and attract younger visitors.

Aerospace Parts

March 18, 2009, District of Delaware. Fairchild Corp, a Virginia-based company whose businesses include aerospace parts distribution, commercial real estate, and apparel for motorcycle enthusiasts. Fairchild intends to continue to do business while it reorganizes.

Chemicals

March 18, 2009, Southern District of New York. Chemtura, specialty chemical maker in Connecticut. The company and its US operations filed for bankruptcy protection after a recent drop in orders, joining LynondellBasell Industries and Tronox to become the third major chemical firm to file since January.

Newpapers

March 13, 2009, District of Delaware. Sun-Times Media Group, the Chicago-based parent company of The Chicago-Sun Times and operator of 59 newspapers. The company has no bank debt but owes $608 million in back taxes and penalties.

Racetracks

March 5, 2009, District of Delaware. Magna Entertainment, one of the largest horse racetrack operators in the US and owner of Laurel Race Tracks, Remington Park, and Pimlico racetrack which hosts the Preakness race, and Santa Anita Park in Southern California. Magna’s prepetition debt and negative cash flow require it to sell off assets. Internet entrepreneur and Thoroughbred owner Halsey Minor is prepared to make an offer to reorganize the company.

Holiday Ramblers

March 5, 2009, District of Delaware. Oregon-based RV maker Monaco Coach, whose products include Monaco, Holiday Rambler, Safari, Beaver, McKenzie, and R-Vision brand names. Despite a litany of cost-cutting measures, the company– along with rest the RV industry — has been decimated by weak consumer confidence, tight credit markets, and a summer season in which gas prices spiked to record highs.

More Newspapers

February 22, 2009, Eastern District of Pennsylvania. Philadelphia Newspapers, parent company of two major newspapers, the Philadelphia Inquirer and Philadelphia Daily News. The same conditions that have devastated the broadcast industry — advertising downturn, rising newsprint costs, and the migration of readers to the Internet — caused the company to default on loans last year. The company intends to continue operations while seeking concession from lenders, although negotiations have been markedly combative.

Casinos

February 17, 2009, District of New Jersey. Donald Trump’s casino group Trump Entertainment Resorts, owner and operator of several Atlantic City casino hotels, including the Trump Taj Mahal, Trump Plaza and Trump Marina. The company filed just days after founder Donald Trump quit the board, saying he disagreed with bondholder’s decisions, including their rejection of his buyout offer. The bankruptcy was filed before bond holders could present an involuntary petition. This is the company’s third bankruptcy filing.

Video Games

February 12, 2009, District of Delaware. Midway Games (and nine of its affiliates), the Chicago-based developer and manufacturer of home video game entertainment products. Best known for the “Mortal Kombat” games, Midway’s legacy also includes landmark titles such as Ms. Pac-Man, Spy Hunter, Tron, the Rush series, and NBA Jam.

Batteries, Shavers, Pet Care

February 3, 2009, Western District of Texas. Atlanta-based Spectrum Brands, the maker of Rayovac batteries, Remington shavers, Spectracide lawn-care products, Cutter insect repellent, and Nature’s Miracle pet care products. The company was delisted from the New York Stock Exchange in January and its stock currently trades for just over a penny per share.

The President’s Clothes

January 23, 2009, Northern District of Illinois. Chicago-based clothier Hartmarx, the largest maker of men’s tailored clothing in the U.S. The company’s clients include President Obama, who wore Hartmarx creations at the Democratic National Convention in Denver, on election night in Chicago, and at his inauguration.

Newspapers (one more time)

January 15, 2009, Southern District of New York. Minnesota’s largest newspaper, the Star Tribune, which was purchased by a private equity group just two years ago. The Star Tribune is the 10th-largest Sunday newspaper in the U.S. and the 15th-largest based on daily circulation.

Restaurants

January 15, 2009, District of Delaware. ARG Enterprises, owner of the Black Angus Steakhouse restaurants. The company is just one in a long string of bankruptcy filings by sit-down restaurants hard hit by the deepening recession.

Department Stores

January 14, 2009, District of Delaware. Gottschalks, a Fresno-based retailer with department and specialty clothing stores in California, Washington, Alaska, Oregon, Nevada, and Idaho. The 58-store chain is in the process of liquidating and closing its doors.

Technology

January 14, 2009, District of Delaware. Technology giant Nortel Networks, one of Canada’s largest companies. The company is under contract to supply the 2012 London Olympics site with equipment for internet access, call centers, and fixed phones. Nortel is the first major technology company to file bankruptcy in the current global economic crisis.

Fuels

January 6, 2009, Southern District of New York. US operations of Netherlands-based chemical giant LyondellBasell Industries. The Company has nine manufacturing facilities located in the Houston area and its products range from fuels to chemicals and plastics.

Crystal

January 5, 2009, London. British luxury crystal and ceramic maker Waterford Wedgwood. In late March the company was bought out of receivership by KPS Capital, a New York-based private equity firm. KPS plans to move some manufacturing jobs from the United Kingdom to Indonesia. As a result of the bankruptcy, Waterford will leave behind debts of $1 billion.

Electronics

November 10, 2008, Eastern District of Virginia. Circuit City, the country’s second largest retailer of consumer electronics. After failing to find a buyer to liquidate its holdings, the company closed all of its 700-odd stores in early March.

Recent government bailouts of private businesses have generated debate about whether the time-honored institution of bankruptcy is the appropriate mechanism for dealing with big business insolvency. Naysayers of the TARP bailouts contend that rescued businesses are candidates for bankruptcy and that bolstering them with public funds not only fails to address underlying problems but erodes the purpose and uniform application of federal bankruptcy law.

Whose losses are these?

One of the basic tenets of a free market is that a corporation’s shareholders and lower priority debt holders enjoy the profits when a business is up and bear the losses when it is down. This notion is consistent with both liquidations and reorganizations in bankruptcy, but it is at direct odds with bailouts funded by taxpayers. The bottom-line effect of the bailouts is to substitute reductions in the disposable income of taxpayers for reductions in the disposable income of shareholders and non-insured debt holders of distressed businesses.

Toss those, keep these.  Who decides?

Should deciding which private companies deserve to be bailed out and which do not be the job of the government? Is bankruptcy (or its banking counterpart, FDIC receivership) really a viable option for some businesses but not others? To be sure, WaMu, Wachovia, and IndyMac have cycled their way through the FDIC, and Lehman is wending its way through bankruptcy. But the roster of companies rescued from the bankruptcy ringer by TARP payments (http://www.opensecrets.org/news/2009/02/tarp-recipients-paid-out-114-m.html) is much more impressive: Citigroup, AIG, JP Morgan Chase, Wells Fargo, GM, Goldman Sachs, Morgan Stanley, American Express, Chrysler, and on and on.

Looking back on bankruptcy

The bailout trend is new and disturbing, but just how “time-honored” is the practice of corporate restructuring in bankruptcy? Bankruptcy law, or some variation thereof, has existed since the days of the Roman Empire. Our modern bankruptcy law has its origins in British bankruptcy statutes dating back to the sixteenth century, but bankruptcy in the form of corporate reorganization is a relatively new phenomenon.

Once a prison, now a sanctuary

Bankruptcy today is generally a voluntary proceeding initiated by the debtor, although it can also be an involuntary proceeding brought by creditors. Early bankruptcies were always involuntary and often resulted in the imprisonment of the delinquent debtor. Today, bankruptcy today can mean the liquidation of a business and the closing of its doors, or the sophisticated restructuring of debt and the continuation of business. Early bankruptcy always involved the liquidation of a debtor. Early bankruptcy was more an “inglorious end” than the “fresh start” we associate with bankruptcy today.

Individual United States colonies adopted various versions of British bankruptcy law. Although imprisonment often remained an option, along the way some debtor-friendly modifications such as property exemptions were added. Section 8, Article I of the Constitution authorized Congress to establish uniform laws on the subject of bankruptcy, but uniformity was slow in coming.

It was not until the enactment of the Bankruptcy Act of 1898 that modern bankruptcy law began to evolve in earnest. Slowly the law began to focus on the rehabilitation of over-extended debtors and the creation of equitable compromises for different classes of creditors. The Chandler Act of 1938 created specific bankruptcy proceedings to allow public and privately-held companies to reorganize instead of liquidating their assets. With that, bankruptcy was on its way to becoming a survival tool instead of a death sentence.

Businesses opt for user-friendly update

The Bankruptcy Reform Act of 1978 made it significantly easier for businesses and consumers to reorganize rather than simply liquidate debts. As modern bankruptcy practice began to take shape in the 1980s, corporate reorganizations moved out of the shadows and into the light. Before that time, major corporations generally did not opt for bankruptcy.

As recently as the 1970s, major corporate bankruptcy was still an oddity. The only two well-known corporate bankruptcies in the 1970s were Penn Central Transportation Corporation in 1970, and W.T. Grant Company in 1975. But beginning with the 1978 Act, bankruptcy became a legitimate option for sophisticated corporations in need of financial overhauls.

Giving legislative history its due

Somewhere in the last 30 years, corporate bankruptcy became a household phrase and a socially acceptable choice for insolvent businesses. Thirty years does not a “time-honored” institution make. But the prioritization of debts in a bankruptcy reorganization has a long and convoluted legal history that should not be ignored.

Objections concerning political impropriety and socialism aside, it may be that government bailouts are efficient and even judicious in a time of economic crisis. But at a minimum, when the injection of equity capital comes from the public sector, the bankruptcy blueprint for prioritization of claims should be observed. To some degree, the offensiveness of taxpayer subsidies would be ameliorated if shareholders and lower priority debt holders were pushed out of the game until the corporation’s assets are sufficient to cover its other liabilities.

Sister companies Anderson Homes and Vanguard Homes — the latest residential real estate companies in the Triangle to succumb to the housing downturn — filed on Monday for Chapter 11 bankruptcy protection, according to an article today in the Triangle Business Journal.

In its bankruptcy documents, Anderson Homes, based in Cary, claims $17.2 million in assets, $13.7 million in liabilities, and 100 to 199 creditors. Vanguard, based in Raleigh, claims $11.1 million in assets, $9.9 million in liabilities, and 50 to 99 creditors.

Dave Servoss, president of Anderson and Vanguard, says the companies ran into the same problems as other home builders: Houses just aren’t selling. “Most of our money’s in the ground,” Servoss says.

Layoffs give builders hope

Anderson Homes has been in business since 1980, building thousands of houses across the North Carolina region known as the Triangle. Vanguard was established in 2006 as an offshoot of Anderson Homes. The companies now employ 13 people, down from a peak of 66, Servoss says. The cuts were part of what Servoss called “a massive overhead reduction program” that he hopes will help put the company in better shape when it emerges from bankruptcy.

The latest in a string of home-builder bankruptcies

Several Triangle home builders and development companies have filed bankruptcy since the start of the housing downturn. The most recent was Vardis Homes of Apex, which filed a Chapter 7 liquidation just last week. Also included are of the region’s most notable names, such as MacGregor Development and St. Lawrence Homes. Many companies related to the business, such as construction and site-preparation firms, also have gone out of business or filed for Chapter 11.

The troubled companies face declining sales in both new and existing housing markets in the Triangle, although the Triangle markets have fared better than most across the country, with home prices remaining relatively steady.

The last resort

You can’t make your mortgage payment. Or you’ve lost your job and are faced with a mountain of credit card debt. Either way, you’re a casualty in the nation’s economic avalanche and you find yourself contemplating the last resort — bankruptcy. Bankruptcy is a choice more and more Americans are willing to make these days. Bankruptcy filings peaked in 2005, when more than 2 million American individuals and businesses rushed to file before a more creditor-oriented law went into effect, according to AACER, a bankruptcy data firm. Filings fell considerably in 2006 and 2007, but in 2008 climbed back up to 1.1 million.

The larger economic picture

The vast majority of filings are personal bankruptcies. The swelling tide of foreclosures is taking its toll. People are struggling in today’s economy, and it’s showing up in the bankruptcy courts. According to AACER, in February of this year, bankruptcies took their biggest year-over-year jump – 37 percent – since the bankruptcy law changed in 2005.

Coming soon to a debtor near you

Bankruptcy can offer a fresh financial start, although it will remain on your credit record for up to ten years, which may make it impossible to obtain competitive interest rates on loans. Many people, however, already have poor credit records when they file and have nowhere to go but up. So, how do you know when it’s time to file? There are no hard and fast formulas, but here are some common indicators:

• You are dipping into your retirement savings regularly.

• Your wages are being garnished by creditors.

• You have large credit card debts and are able to make only the minimum payments.

• Your house is in foreclosure proceedings.

A little something for everyone

Home ownership status and income level are some of the factors in determining whether you file a Chapter 7 bankruptcy or a Chapter 13. Under Chapter 7, many if not all of your debts can be canceled, with exceptions including unpaid child support, student loans, and some kinds of taxes. If you have regular income in excess of a certain amount, you may have to file under Chapter 13, which involves paying back some or all of your debts over a three- to five-year period.

Chapter 13 can be the preferred route if you want avoid a foreclosure, and if you have significant equity in your home or car. In a Chapter 7 case, you remain at risk of foreclosure if you can’t bring your past-due mortgage payments current. In Chapter 13, you can pay your mortgage arrearages over three to five years.

Also, Chapter 13 allows you to keep some kinds of non-exempt property that you would have to give up under Chapter 7, including equity in your home and car. But many people who file under Chapter 13 fail to complete their debt repayment plans and end up converting to Chapter 7, sometimes losing the houses and cars they were trying to keep.

The Dallas Business Journal reported today that Idearc Inc.’s largest shareholder has issued a statement saying the company has no need to contemplate the possibility of filing for Chapter 11 bankruptcy in the future.

Idearc, headquartered at Dallas/Fort Worth International Airport, publishes telephone books and provides consumer information over the Internet. It has about 7,200 employees and 100 offices in the U.S.

Shareholder says “No”

The shareholder, Jack Corwin, sent letters to each Idearc board member and issued a public statement saying he was “shocked” to find statements in Idearc’s earnings release suggesting that the company is pursuing all strategic options and that the option of filing for Chapter 11 bankruptcy protection is on the table.

In his letter to shareholders Corwin said that other alternatives need to be pursued, including the option of Idearc paying down outstanding debt with the $510 million in cash it had on hand in late 2008. He added that failure to pursue other alternatives before deciding on a Chapter 11 bankruptcy reorganization is a breach of the Board’s fiduciary duty to shareholders.

“This comes at a time when all eyes are on corporate America to behave with the utmost fiduciary responsibility. Where alternatives may exist for companies to avoid bankruptcy it is highly unusual for a corporation to choose the route of bankruptcy at the risk of damaging [its] business and harming [its] employees and other stakeholders,” Corwin said. “The impact on local and national communities and economies is significant, to put it mildly,” he added.

Earning statement says “Maybe so”

Last week, Idearc posted a fourth-quarter loss of $77 million on sales of $709 million, and said in notes attached to the earnings statement that it is “currently considering a restructuring” under federal bankruptcy laws. Based on current forecasts and year-end results, Idearc is out of compliance with one lender’s agreement and risks being out of compliance with a second. As a result, lenders have the right to consider all the company’s debt in default and could call it due within 30 days, Idearc said.

Shareholder would be last in line for payment

In bankruptcy, shareholders such as Corwin are last in line to be paid. As of mid-February Corwin reported holding more than 8% of Idearc stock, or more than 12 million shares. Idearc shares were trading at 5.5 cents at midday on Monday.

(Image from Flickr.com)

According to the Dayton Business Journal , Blockbuster Inc.’s stock price rose 13.83 percent Monday morning to 74 cents per share. The increase came after the company received a vote of confidence from a former competitor who purchased additional stock in the company.

A Securities and Exchange Commission filing says Mark Wattles, president of Wattles Capital Management LLC and the founder of Hollywood Entertainment Corp., purchased Blockbuster shares this week, bringing his ownership to 5.7 percent of all outstanding shares of common stock.

and based on his experience

Wattles has experience in the industry. He founded Hollywood Entertainment Corp., a movie and video game rental company that became the second largest movie rental and retail chain after Blockbuster.

believes there’s no reason to file bankruptcy

In the filing Wattles expressed confidence in Blockbuster (NYSE: BBI), saying he does not believe Blockbuster has a motive to file a Chapter 11 bankruptcy reorganization. His confidence is backed by Blockbuster’s proactive cost-cutting through store closings and subleases.

The filing states: “Mr. Wattles does not believe that the issuer has a motive to reorganize under Chapter 11. In addition, regardless of likelihood of obtaining a ‘going concern’ qualification from its auditors, Mr. Wattles believes the issuer will be successful in refinancing its revolving bank line of credit, or if it cannot, that it will be able to use cash flow from operations to meet its August repayment obligations.”