Re: Sad news

What happens if you are a second-tier creditor and choose to remove yourself from that group? Well... OK. Then most likely you fall down to the end of the line, and get whatever happens to be left over at the end (just ahead of the stockholders). This almost certainly would be zero.

Actually, taking the hit is not all that horrid a choice. Usually trade creditors limit their exposure to one or two months sales, and they will lose most of that. But from then on (if things work well) they are back again to getting the full payments, and in twelve months they conceivably will get 6 to 12 times what was written off. Not good, but not horrible, either. Add in to that that most trade creditors have built up reserves for bad debts, so their bottom line is not really affected all that bad.

One benefit for trade creditors that take a hit is that companies that go through Chapter 11 generally remember the trade creditors that helped them, and this creates a loyalty that is hard for the competition to overcome.

In other words, it really is in the best interests of the trade creditors to help insure, as best they can, the future of the reorganized company. Taking an 65% hit is tough, but if an 85% hit gives the company a better chance of success then by all means, take the 85% hit.



On 2/15/2010 4:48 PM, Joe Pluta wrote:

I have NO idea, Chuck. That's what's so sinister about it. They simple
say "might be penalized". Logically that would seem to infer you would
get less than you're supposed to get, but one never knows. If you know
you're one of the folks who are getting nothing and you try to get
payment, do they send over a couple of large fellows with bad attitudes?

Anyway, Jon's right - the conversation is probably drifting just a tad... :)

Joe

HOW could you be penalized Joe?

-----Original Message-----
From: midrange-l-bounces@xxxxxxxxxxxx
[mailto:midrange-l-bounces@xxxxxxxxxxxx] On Behalf Of Joe Pluta
Sent: Saturday, February 13, 2010 11:01 PM
To: Midrange Systems Technical Discussion
Subject: Re: Sad news

Ah, the lovely world of financial dealings. I don't know what you mean
by "well into coming out of it" but as far as I've read they filed last
week (Tuesday?) a pre-packaged plan to reorganize about a quarter of
their debt and they expect to be done with the process in 45-60 days.
It's a prepackaged bankruptcy which means everything is a done deal, and

they already know who is going to get what. In fact, I got a letter
saying that if I attempted to collect any debts owed me I might be
penalized. Vaguely authoritarian legal stuff, but pre-packs are all the

rage now.

Joe