chapter 11?

[LH 340-600]

With all these carriers declaring bankruptcy and entering Chapter 11 I'd like to know more about chapter 11 and what it is about.
I know that the airliners can reorganize their busines in several ways.
But how can they do this?
And what are possible advantages and disadvantages of chapter 11?

US Airways for example is supposed to be stronger after chapter 11.

[aerpix]

While in Chapter 11 you do not have to pay any bills. You need, however, a business plan to restructure, and this plan must be approved by the courts. Also time you can be in Chapter 11 is limited by courts.

Regards,
Peter

[Thomas_Cook_757-200]

Hi,
In theory whilst in Chapter 11 your protected from bankruptcy unless the restructuring fails. Once in Chapter 11 the only people to have control over the companies running as such is its administrators.

Thanks

Thomas_CooK_757-200

[iceman]

Here is a nice site that explains the CH 11 process:

http://sec.broaddaylight.com/sec/FAQ_20_260.shtm.

And here is a link that shows the Ch. 11 rules:

http://www.hg.org/cgi-bin/redir.cgi?url=http://www.law.cornell.edu/uscode/11/ch11.html

In a nutshell, the company’s debt and finances is reorganized while under Chapter 11 protection. The company can continue to run day-to-day operations, but each business decision must be met with the approval of the bankruptcy court judge presiding on the case. The judge can also decide to nullify contracts or change the business model if he sees this as more beneficial to the company or the creditors.

In theory, the company is supposed to emerge from Ch. 11 with a better business model that is more profitable than their previous one, though it is not a certainty that they will be profitable. USAir, for example, recently emerged from Ch. 11, but their operations are still in the red.

Many, many companies have come out of Ch. 11 protection stronger than before. A few examples are Toys ‘R’ Us and Continental (they went through it twice, if I recall). But a lot of times the company’s credit rating is completely obliterated and their debt worsens. Continental may be hemorrhaging less than the other airlines – and that is probably because they have a better business model – but their credit rating is completely shot and their debt is much worse than before. I’d worry more about them if they file than any other the other airlines.

Here's a US Bankruptcy law FAQ:

http://www.sec.gov/investor/pubs/bankrupt.htm.