Bankruptcy filings tend to make headlines when they are filed, especially when it comes to high-profile companies that trade publicly and have an impact on many people.
Less public, though, are the instances when companies that previously filed bankruptcy reorganize, reemerge and appear once again on the stock market. USA Today recently discussed this very topic, and took a survey of some of the companies that have reappeared on the stock market after filing for bankruptcy.
USA Today acquired this information during a study completed with the cooperation of BankruptcyData.com. Right now is an important time to evaluate what is happening to companies that file for Chapter 11 bankruptcy (personal bankruptcy is usually under Ch 7 or 13), according to the article. And there are many to choose from, as the recession has led to record filing numbers, which the article calls “a boom in filing during the credit crunch.”
In 2009, 207 publicly traded companies decided to file for bankruptcy protection. When measured by against past years, 2009 ranks as the third busiest year for corporate bankruptcy filings.
BankruptcyData.com also determined that in 2008, companies that filed
for Chapter 11 bankruptcy protection had over $1 trillion in assets to
The survey looked for trends and traits of companies that were able to successfully rebound after a filing. They found that the opportunity to reorganize didn't guarantee success for the company.
The odds of a company returning to the spotlight in the same form after bankruptcy are not particularly good. Out of 180 publicly traded companies that filed for bankruptcy between 2000 and 2009, only 33 of them are currently listed on a major stock exchange.
AboveNet is one company that was able to beat the odds and go from bankruptcy to major stock market listing.
Bill LaPerch is CEO of the company, and he told USA Today, “We were in the coffin. We just had two problems: we ran out of money, and our customers ran out of money.” The telecom company filed for bankruptcy in 2002, and returned to the stock market last year.
AboveNet shared one of the key traits needed for a company to fully recover: The “ability to tap valuable assets buried inside a challenged company.”
In other words, these companies were able to act upon the valuable assets that they still controlled after filing bankruptcy. In the case of AboveNet, this meant the extremely valuable $4 billion worth of telecom links that it had bought while expanding. It was an unmanageable debt load that caused its business problems. So AboveNet refocused its efforts in cities where it could bring telecom services at a lower price.
Some of the companies able to emerge from bankruptcy also were able to re-invent their business, approach their markets in new ways, and capitalize on new technology.
One such company was Idearc, which originally published yellow pages directories. Sinking from too much debt, the company leaders realized that only a redefinition of its approach could save it.
The company changed its name and its mission, moving to mobile phone and online technology, and reshaped its relationship to customer service and customer feedback. After filing bankruptcy in 2008, it returned to the market in January of 2010. The company’s CEO, Scott Klein, said “There are two types of businesses: those that change and those that go out of business.”