Bankruptcy

Paper Summary:

In this essay, the writer discusses the filing for Chapter 11 bankruptcy reorganization by Interstate Bakeries, the maker of well-known food products such as Twinkies and Wonder Bread. The writer explains that although Interstate had several options at its disposal to reduce debt and generate cash, ultimately Chapter 11 bankruptcy allowed Interstate to address its debt and cost problems without having to mortgage the company's future through overly deep cuts or sell-offs. The writer then looks at different types of bankruptcy and discusses the alternatives that were available to Interstate. The writer concludes that by filing Chapter 11 bankruptcy, Interstate was able to get a handle on its costs, alleviate its debt, and emerge as a stronger and more stable operation.

Outline:
Types of Bankruptcy
Alternatives to Chapter 11: Pros and Cons
Conclusion

From the Paper:

"In a Chapter 11 bankruptcy process, the court and a company's debtors will approve a reorganization plan that, among other things, determines how much various creditors get paid. There are two classes of competitors: secured and unsecured. The secured creditors, such as banks, get paid first; the unsecured creditors, such as vendors, may get only pennies on the dollar. Chapter 11 sometimes allows companies to restructure contracts, such as union deals, which was a big problem for Interstate. At any rate, companies emerge from Chapter 11 with a much better debt and cash-flow picture."
"Municipal organizations, such as cities or school districts, have a form of bankruptcy similar to Chapter 11, which is called Chapter 9 bankruptcy. Chapter 9 bankruptcy allows a municipal entity to restructure its debt and reorganize its operations, similar to Chapter 11."

Sample of Sources Used:

• "Corporate bankruptcy" Securities & Exchange Commission 2005. 2 April 2007 http://www.sec.gov/investor/pubs/bankrupt.htm.
• Murphy, John Francis. "What are the different types of bankruptcy?" The Bankruptcy Lawyer 2005. 2 April 2007 http://www.thebankruptcylawyer.net/types_of_bankruptcy.htm.
• Twitty, David. "Maker of Twinkies and Wonder Bread files for bankruptcy." Sign on San Diego Sept. 22, 2004. 2 April 2007http://www.signonsandiego.com/news/business/20040922-1343-interstatebakeries-bankruptcy.html.

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