Info

$412.8

Estimated enterprise value using discounted cash flow method (Exhibit B.4)

$711.1

Absolute priority rule, 19, 192 Academic research: bankruptcy costs, 18 bankruptcy resolution, 19 carve-outs, 235

corporate governance changes, 17-18

creditors' claims, 17

employee claims, 317-318

equity spin-offs, 235-236

stock prices, long-run performance,

18-19 tracking stock, 235 Accounting for employee benefits,

329-332 Adamson, James, 116, 125-126 Adjusted present value (APV) method,

491-495, 500-504 Administrative bankruptcy costs, 212, 248

Aeromexico, 93 Agency costs, 486-487 Air Canada/Air Partners, 91-95, 194 Allegheny International, 210-211, 224 Allis-Chalmers, 221 Alphatec Electronics Public Company Limited (ATEC): acquisitions, 153 Alphatec Group, 152-153 background, 12, 20-21, 150-152 bankruptcy filing, 164-167 creditors/claims, 163-164, 166-167, 173

creditors steering committee (CSC), 156, 163

currency crisis, impact on, 156-157 debt, 165, 173

de Vries, Willem, 154, 159-160 equity investment, 165-166 financial distress, 155-161 financial projections, 186 financial statements, 170-172,182-185 history of, 152-155 IPO, 152

management changes, 158-159 Mollerstuen, Robert, 150-151, 154, 156,

158-160, 162, 167 restructuring plan, 161-166, 178-180, 185-187

Thai bankruptcy law, 163-165, 181 Uswachoke, Charn, 150-155, 157-160, 162

Anderson, Basil, 364 Antitrust, 36, 459 Apollo Advisors, 216 Arbor Capital, 32 Asia:

bankruptcy laws, 16, 21 financial crisis, 2 Avoidable preferences, 204-205

Balick, Judge Helen, 94 Bank Holding Company Act (1956), 419

Bank mergers, 433. See also Chemical Bank/Chase Manhattan Corporation merger Bankruptcy filings: extension of exclusivity, 40 statistics, 23, 227 Bankruptcy judge, role of, 17, 40, 86, 94,

199-201,217 Bargaining over value, 10-11 Benefits Concepts of New York Inc., 92-93

Best-interests-of-creditors test, 227-228 Beta, 82, 147, 490 Bethlehem Steel Corporation, 270 Betriebsanierung, 398 Black, Leon, 197 Blackstone Group, The, 35 Blocking strategy in Chapter 11, 196-197, 209

Board of directors, role of, 204, 232, 238, 253

Boesky, Ivan, 269 Bonderman, David, 91

Bondholders, restructuring strategies, 9,

208-209, 223, 274 Bondmail, 196-197 Bradlees, 225 Brener, Alfredo, 90-91 Business judgement rule, 276 Business purpose test for spin-offs, 6-7, 282

Butcher, Willard, 416

Canada, bankruptcy filing in, 40 Cancellation of indebtedness (COD), 220

Capital Asset Pricing Model (CAPM), 490-491

Capital cash flow (CCF) method, 495^196,

500, 505 Carpenter, Dan, 92 Carriage Services Inc., 27-28 Carve-outs, see Equity carve-outs Chapter 11 bankruptcy, generally: exit from, 39-40 incidence of, 1 prepackaged, 9, 18, 192 Chapter 7 liquidation, 190-192, 217, 226

Chase Manhattan Corporation: background, 4, 6, 13, 319, 415^117,

448-449 banking industry, 432, 435-437 Chemical Bank merger, see Chemical Bank/Chase Manhattan Corporation merger

Chemical Bank/Chase Manhattan Corporation merger: banking industry trends, 417-421, 432,

435-437 benefits of bank mergers, 412-413,

421-422, 424-427 comparables analysis, 439 employees, impact on, 430 exchange ratio, 428 merger and consolidation process,

417-421 merger integration, 428-430 Merger Overview Model (MOM), 429

merger terms, 427-428

restructuring analysis, 421-427 revenue enhancements, 430-431, 441

Chemical Banking Corporation: background, 4, 6, 13, 413-415 Chase Manhattan Corporation merger, see Chemical Bank/Chase Manhattan Corporation merger financial statements, 443-444 financial summary, 446-448 Manufacturers Hanover merger, 413-415, 418, 422-423, 427^28, 430-431 Margin Improvement Program, 415

Cherry, Wendell, 244 Citicorp Venture Capital, 218 Claims, hierarchy of, 228 Codetermination, 398 Collateral, 38-39, 62 Community Reinvestment Act (1977), 431

Companies' Creditors Arrangement Act

(CCAA), 40 Compensation: equity carve-outs and, 234 equity-linked, 18

executive, 125-126, 237, 376-377 in stock breakups, 235-236 turnaround management, 235 Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 205-207 Computer reservation system (CRS), 93, 95

Confidentiality agreements, 221 Conflict, inter-claimholder, 10 Conflict resolution, 11 Conflicts of interest, 233, 276 Coniston Partners, 110, 115 Consensual plan of reorganization, 196,

225-226 Consolidation strategies, 30-32 Continental Airlines, 4, 9, 20. See also

Continental Holdings Continental Holdings: Air Canada/Air Partners offer, 91-95 Air Micronesia, 93

auction, 90-94, 104 background, 20, 83-86, 98-99 bankruptcy, 86-89 Benefits Concepts of New York Inc.

offer, 92-93 capital expenditures, 95-96 common stock, 89 competitors, 108

computer reservation system (CRS), 93, 95

consolidation, 85, 99-101 financial forecasts, 105-106 Houston Air offer, 90-91, 94 liquidation analysis, 102 Lufthansa offer, 92, 94-95 MAXAIR offer, 90, 93-94 reorganization plan, 89-90, 101

secured debt, 87

Texas Air Corp., tender offer, 85 Contingent claims, 207-208 Control strategies in bankruptcy, 193-196

Corporate restructuring, generally: analysis framework, 485-488 bargaining, 10-11 benefits of, 3 business purpose, 6-7 design of, 6 execution of, 6, 9-10 incidence of, 1-2 reasons for, 1 timing of, 7-8 Corry, Charles, 266-268, 273 Cost shifting, 249 Cotting, James C., 323-324 Coulter, James, 91 Covenants, 234 Cram-down, 119, 127, 197 Creditors: claims, see Creditors' claims committees, 39, 156, 163 junior, 213-214, 224 protection from, 40 senior, 16, 19, 213-215, 224 value allocation, 11 Creditors' claims, see Alphatec Electronics Public Company Limited; Continental

Airlines; Flagstar Companies, Inc.; Loewen Group Inc.; National Convenience Stores Incorporated academic research, 17 distressed situation investments, market survey, 188-227 management challenges, 15-17 Cross default covenants, 39

Dailey, Jack, 364 Davis, Marvin, 90, 92, 94 Death care firms, 26-30 Debt market, distressed, 189 Debtor-in-possession financing, 40-41, 62, 191

Debt refinancing, 234 Debt workouts, 4

Defaulted bonds, weighted-average price, 228

Denny's restaurants, 111-113, 115, 117, 129, 145

Deutsche Kugellagerfabriken Leipzig

(DKFL), 394-396 DeVries, Willem, 159-160 Dickstein Partners L.P., 222 Dillon Read, 121-123 Disclosure statement, 65 Disclosure strategies, 12-13, 493 Discounted cash flow valuation:

adjusted present value (APV) method,

491-495, 500-504 Capital Asset Pricing Model (CAPM),

490-491 capital cash flow (CCF) method,

495-496, 500, 505 discount rate, 490^91 weighted average cost of capital (WACC) method, 496-497, 500 Discount rate, 490-491 Disputed claims, 207-208 Dispute resolution, 10-11 Distressed claims, 189-190 Distressed situations, investment in, see Financial distress, market survey investment risks, 199-222 passive investment strategies, 198-199

Distressed situations, investment in, see Financial distress, market survey (Continued) proactive investment strategies, 193-197

vulture investors, 188, 193, 222-224 Diversification, see specific corporations Dividend payouts, see specific corporations Donald Salter Communications, Inc.: background, 13, 291-296 competition, 306 diversification, 302 dividend payout, 301-302 financial statements, 297, 304 incentive plans, 297-298, 307-311 Myers, Jim, 291,294, 296,

298-303 operating turnaround, 299-303 S corporation status, 292-293 valuation, 298-299, 312-314 Donaldson, Lufkin 8c Jenrette (DLJ), 113,

117-118, 120-122 Downsizing, 6-7, 10, 54, 62-63, 316. See also Employees' claims; Layoffs Dublon, Dina, 424 Dun & Bradstreet, 28 Dunlap, Albert, 4, 6, 353, 358-361, 363-365, 376-378, 386

Earn-out provisions, 11, 462-463 Eastern Airlines, 200 Economic value added (EVA), 358 Electronic Data Systems (EDS),

275-276 Embry, Talton, 197

Employee stock ownership plan (ESOP),

61,92, 252, 457,462 Employees' claims, see Chase Manhattan Corporation; FAG Kugelfischer; Navistar International; Scott Paper Company; UAL Corporation academic research, 317-318 layoffs, 315-318

management challenges, 316-317 plant closings, 318 Environmental Protection Agency (EPA), 207

Equitable subordination, 205 Equity carve-outs: academic research, 235 description of, 2, 231-232 management challenges, 234 Equity spin-offs: academic research, 235-236 description of 2, 4-5, 231-232 double taxation, 272 management challenges, 233-234 valuation errors, 486 E-II Holdings, 209 Exclusivity period, 200 Executory contracts, 17, 63, 87, 208 Exit strategies, 220-221 Extendicare, 244

FAG Kugelfischer: background, 11, 319, 387-390 bearings industry trends, 390-393,

406 benefits, 407

company culture, 393-394 competitors, 392 diversification, 389-390 East Germany, expansion into, 394-396 expenditures, 406 financial data, 404-405 financial statements, 401-404 German law, 398-399 German restructuring, 397-399 Neukirchen, Karl-Josef, 387, 396-397, 400

preferred stock, 393-394 Schäfer family, 388, 393-394 stakeholder capitalism, 398 U.S. standards compared with German,

408-410 wages, 407 Fair market value, 277. See also Market value

Family-owned companies, 237-238 Feasibility test, 227 Federal Bankruptcy Rule 3001(e), 201-202, 221 Ferguson, Bob, 83, 86-88, 94-95 Financial Accounting Standards Board (FASB), 277, 330

Financial Accounting Standards No. 106

(FAS 106), 330 First Executive, 216 Flagstar Companies, Inc.: acquisitions, 117 Adamson, James, 116, 125-126 background, 9, 20 best interests test, 119 common stock, 126, 130 company history, 112-117 competitors, 147 convertible preferred stock, 114 debt, 118-119, 122, 131, 148 Denny's, 111-113, 115, 117, 129, 145

enterprise value, estimation of, 120-123,

137-139, 143-145, 149 executive compensation, 125-126 feasibility test, 119 financial data, 128, 133 financial projections, 136 financial statements, 140, 146 industry background, 110-111 junior creditors, objections of,

123-127 leveraged buyout, 112-113 liquidation analysis, 134-136 management, 114-116 options for, 127

prepackaged Chapter 11, 117-119 recapitalization, 113-114 reorganization plan, 132 Richardson, Jerry, 114-116 Focused firms, 235-236 Foreclosure, 206 14D-1 filing, 215 Fraudulent conveyance, 204, 234 Free cash flows, 493

Gallatin, Ron, 274

General Motors, 275-276, 290

Generally Accepted Accounting Principles

(GAAP), 13 Germany, restructuring in, see FAG

Kugelfischer Gillett Holdings, 197 Glass Steagall Act (1933), 419

Golden parachutes, 35 Graham, Margaret, 292, 294 Grand Union, 225 Great Southern Group, 34 Greenwald, Gerald, 461—462 Guillotine rule, 40

Hacker, Douglas, 451

Hall, Roger, 452

Harris, Hollis, 86, 91

Havanonda, Waree, 154

Heiligbrodt, William, 50

Hernandez, Robert, 266, 268, 274

Hills Department Stores, 208, 222

Holder of record, 208

Holding period, investment in distressed debt, 207,211-213 Holdout problem, 223 Hospital Corporation of America (HCA), 251

Houston Air, 90-91, 94 Hughes Aircraft, 275-276, 290 Humana Inc.: acquisitions, 244 background, 8, 10, 242-247, 257 common stock, 254 financial statements, consolidated, 259

HMOs and PPOs, 245-247, 258, 260, 262

hospital industry, 249 integrated strategy, réévaluation of, 247-250

restructuring alternatives, 250-252 spin-off proposal, 252-255 stock buyback, 252 stock options, 254-255 stock ownership, 265 stock price, 256 stock repurchase, 237 tracking stock, 250-251

Icahn, Carl, 85, 197, 270-273, 278 Implementation, in restructuring, 6, 9-10

Industry trends, see specific corporations Information costs, 487

Information resources, see Academic research

Initial public offerings (IPOs), 152, 220 Insider trading, 217-218, 269 International Harvester, 324-325 Interstate banking, 419

Japanese economy, 2-3. See also Japonica

Partners L.P. Japonica Partners L.P., 210-211, 224

Jefferies & Co., 120-122, 144 Jensen, Michael, 485 Jones, David, 242-244, 253, 255 J. P. Morgan, 121

Junior creditors, 123-127, 192, 195, 212, 224

Junk bonds, 216

Kaiser Permanente, 247 Kersh, Russ, 364

Kohl berg Kravis Roberts 8c Co. (KKR),

20, 113, 115, 124, 126-127 KPMG Peat Marwick Suthee Ltd.

(KPMG), 151 Kravis, Henry, 113 Krung Thai Bank, 166-167

Labor costs, 315, 322 Labor unions, 11, 85, 324-325, 330, 336

Labrecque, Thomas, 412, 416 Lacey, John, 26, 37, 41 Layoffs:

corporate benefits, generally, 7, 10,

315-318 incidence of, 322 Lazard Freres, 121 Lease contracts, 17, 63, 87-88 Lehman Brothers, 155 Leveraged buyouts, 6, 117-119, 204, 213,

220, 251-252 Liability: environmental, 205-206 lender liability, 205 tax, 218-219 Licensing agreements, treatment of in Chapter 11,17

Lippincott, Philip, 357-358 Liquidation, 216-217 Liquidity risk, 220-222 Loewen, Ray, 25-26, 31-34, 37, 50 Loewen Group Inc.: acquisitions, 25-27, 48 background, 9, 19-21 bankruptcy, 39-41 common stock, 25

death care firms, industry background,

26-30, 42 debt, 36, 38-39, 53 financial crisis, 25-26, 36-41 financial statements, 43-45 financial summary, 49 growth through consolidation, 30-32

Loewen, Ray, 31-34, 37, 50 managerial changes, 37 pre-need business, 28-30 SCI, 27-28, 30, 34-36, 50 stock prices, 26-27, 34-35, 47 Lorenzo, Frank, 86 LTV Corporation, 212, 278 Lufthansa, 92, 94-95

McFadden Act (1927), 419 McGillicuddy, John, 414 Management challenges: creditors' claims, 15-17 employee claims, 316-317 equity carve-outs, 234 equity spin-offs, 233-234 stock breakups, 234-235 tracking stock, 234-235 Management-labor relations, see Labor unions; Navistar International; Scott Paper Company Managerial responsibilities, 11-12, 15-17, 24

Manufacturers Hanover, 413-415, 418, 422-423, 427-428, 430-431 Marathon Group, 278 Market imperfections, 486 Marketing a restructuring, 6, 12-13 Market liquidity, 221 Market risk premium, 491

Market value: influential factors, 3-5, 12-13, 235,

485-487 multiples, 497-498, 506 Martinez, Roberto, 302 MAXAIR, 90, 92-94 Maxxam Inc., 90 Meckling, William, 485 Megabankruptcy, 225 Mergers, characteristics of, 4, 6, 10-11,

13. See also specific mergers MGF Oil, 215 Miller, Ed, 429

Mollerstuen, Robert, 150-151, 154, 156,

158-160, 162, 167 Murtagh, John, 364 Myers, Jim, 291, 294, 296, 298-303

National Convenience Stores Incorporated: background, 20, 55-56 capital structure, 71 company comparable analysis, 81 debt-to-equity ratio, 59 downsizing, 62-63 equity, 67

financial performance, historical, 56-57

financial projections, 64-65, 72-81 liquidity crisis, 59-62, 70 marketing strategy shifts, 57, 59, 64 participants in reorganization, 65-68 restructuring charges, 69 secured claims, 66 store closures, 62-63 strategic review of, 62-64 unsecured claims, 66-67 National Gypsum, 214 Navistar International:

accounting standards, 329-332 background, 10, 319, 323-326 common stock, 336 comparative data, 327, 348-349 debt, 326, 334-335, 350 downsizing, 325-326 financial statements, 331, 338-345 health care benefits, 328-331 industry trends, 326-327, 337 litigation, 333-335

negotiations with labor union, 330,

333-336 options for, 332-333 projections, 331, 351-352 retiree benefits, 328-329, 332,

346-347 workforce changes, 345 Negotiation strategy, 10-12, 315-316, 330, 333-336. See also Employees' claims

Net operating losses (NOLs), 96, 219-221,

272,492-494 Neukirchen, Karl-Josef, 387, 396-397, 400

Nippon Seiko (NSK), 392 Noncompetition agreements, 38 Nonconsensual plan of reorganization, 226

North American Free Trade Agreement

(NAFTA), 41 NTN Corporation, 392

Out-of-court restructuring, 191-192 Out-of-pocket costs of bankruptcy, 18

Papercraft Corporation, 218 Parent-subsidiary relationships in equity restructuring, 233 Passive investment strategies, 198-199 Pension Benefit Guaranty Corporation, 208

People Express Airlines, 84-85 Perot, Ross, 275 Perot, Ross, Jr., 90 Phelps, Sanford, 197 Phungsom, Nonglak, 159-160 Preemptive restructuring, 7-8 Preferred stock, 209, 393 Price, Michael, 417 Price Waterhouse (PW), 150, 155,

157-158, 162 Price Waterhouse Corporate Restructuring

Ltd. (PWCR), 164, 167 Prime Succession Inc., 35-36, 51-52 Proactive investment strategies, 193-197 Proof of claim, 201-203 Purchase/purchaser information, distressed debt, 215-216

Reorganization plan, generally: Chapter 11, confirmation rules,

225-227 characteristics of, 39 consensual plan, 196, 225 feasibility test, 227 nonconsensual plans, 226 submission of, 194 Representations and warranties,

206-207 Restaurant industry, 111, 142 Restrictive covenants, 38 Restructuring options, 190-192. See also Corporate restructuring; specific corporations Retiree Benefits Bankruptcy Protection

Act, 335 Reveo D.S., 194, 197 Revere Copper and Brass, 202 R. H. Macy, 199,219, 221,224 Richardson, Jerry, 114-116 Riegle-Neal Interstate Banking and Branching Efficiency Act, 419 Risks of investing in distressed debt: avoidable preferences, 204-205 contingent claims, 207-208 defective merchandise, 203-205 disputed claims, 207-208 environmental liabilities, 205-206 equitable subordination, 205 fraudulent conveyance, 204 holding period, 211-213 insider trading, 217-218 lender liability, 205 liquidation, 216-217 liquidity, 220-222 protection from, 206-207 purchase/purchaser information, lack of,

215-216 taxation, 218-220 title, 203

transferring claims, 201-203 vote counts, 208-211 Robinson, Jack, 92 Rockefeller, David, 416 Roderick, David, 268-270 Rose Hills, 36, 51-52 Rule of absolute priority, 19, 192

Schäfer, Fritz, 393 Schafer, Georg, 388 Schulte, David, 194 Scott Paper Company:

background, 4-6, 13, 319, 353-358 competition, 370-371 corporate culture, 356 debt, 375

Dunlap, Albert, 353, 358-361, 363-365,

376-378, 386 employee claims, 315 expenditures, 362, 380 financial projections, 383-384 financial statements, 358, 372-374 financial summary, 367-369 industry background, 354-356, 366 industry trends, 364—365, 381 investor relations, 362 layoffs, 354, 363-364, 382 Lippincott, Philip, 357-358 management-labor relations, 360-361 managerial decisions, 364-365 outsourcing, 361-362, 379 S.D. Warren, 354-355, 357, 365 Secured debt, 38 Securities Act of 1933, 117 Securities and Exchange Commission (SEC), 118, 213, 215, 221-222, 335,

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