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Commercial bankruptcy: a tool for recovery

Commercial bankruptcy may be an outcome of a corporate wind-down or it may provide a promising path to restoration of financial health for a business. This post will look at examples of each, reminding readers that business bankruptcy can be a stepping stone along the way rather than a dead end.

Recent notable San Francisco area Chapter 11 debt reorganization bankruptcy filings have included a well-known South San Francisco pharmaceutical company and, as referenced in an earlier post, an iconic San Francisco craft brewery.

The pharmaceutical company was already suffering from decline after a series of clinical trial failures when it recruited a new CEO, a former hedge fund manager who was subsequently arrested for securities fraud. The Chapter 11 bankruptcy filing - and a 90 percent decline in stock values - followed soon thereafter. This business may well be reaching its end.

The brewery, on the other hand, had taken on excessive debt to pay for a promising expansion and subsequently ran into cash flow problems. The owner has expressed confidence that bankruptcy for this establishment will enable it to continue operations through management of its large debt burden that Chapter 11 bankruptcy's debt reorganization makes possible.

Other, less notorious regional commercial entities electing Chapter 11 bankruptcy have included businesses such as residential care facilities for the elderly, wineries, restaurants, manufacturers and retail outlets. Some are heading for closures, but others forecast long-term recoveries once debts are under control once again.

Whether a company opting for Chapter 11 bankruptcy is winding down or gearing up for a new beginning, early, comprehensive legal counsel is vital. Macdonald Fernandez is available to evaluate a business's termination plans or recovery strategy. Attorneys are prepared to advise owners on how to prepare for bankruptcy and use it as a tool for closure or a tool for revival, as the case may be.

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