Newspaper article THE JOURNAL RECORD

Filing Bankruptcy: Big Companies Shop for the Best Deal

Newspaper article THE JOURNAL RECORD

Filing Bankruptcy: Big Companies Shop for the Best Deal

Article excerpt

BOSTON -- When large companies file for bankruptcy protection, they do what most savvy customers do: shop for the best deal.

Big public companies that filed for bankruptcy between 1980-97 often "shopped" for a debtor-friendly court or judge, according to a study by a pair of law school professors.

Lynn M. LoPucki, a visiting professor at Harvard Law School, and Theodore Eisenberg of Cornell studied the 273 largest public companies -- defined as those with assets of more than $200 million - - that filed for bankruptcy over the last 18 years. In the early 1980s, 20 percent of the cases were filed in court districts other than the ones where the companies' headquarters were located. Since 1994, more than half of the filings have taken place in districts away from company headquarters. "The natural place to file is where you are, and they're filing somewhere else," LoPucki said. During the 1980s, New York City was the most popular destination for companies shopping for bankruptcy court. About 30 percent of all bankruptcy cases filed nationwide were filed in New York, even though many of those companies were not located there, the study found. At the time, New York was considered friendly to debtors because cases moved slowly, allowing companies more time to reorganize and make better offers to creditors. One judge in particular took on many of the cases and was considered debtor-friendly, LoPucki said. In 1988, responding to claims of bias, the New York courts switched to a random judge assignment system, thereby clamping down on judge-shopping. Two years later, two large debtors filed for Chapter 11 in Delaware after a state bankruptcy judge ruled that companies could file for protection in the state where they are incorporated. Ninety-one percent of the large companies that filed for bankruptcy reorganization during the 18 years studied were incorporated in Delaware or had subsidiaries that were. …

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