The Question and Answer Board

[marty_lewis]

OT-Seahag-

Generally the shareholders take a bath when a company goes chapter 11. They usually declare the existing stock worthless, and they start over with new stock holders, those usually being the existing debt holders who usually agree to have their debt converted into equity.

The chapter 7 is total bankruptcy where the assets are sold off, debt holders getting what they can according to their rank. The shareholders get nothing, usually.

It's (chapter 11) not that bad for the company (other than the stigma which hurts them until they prove they can succeed), because they can start over with no big debt and it's accompanying interest payments.

But it's all up to the courts, and the reorganization plan. Sometimes the companies just have interest payments put on hold, and the shareholders don't lose their stock, but I haven't seen that too much.

So it's really broken down into two sides.. Usually not bad for the company, but usually bad for the existing stockholders.

Did that all make any sense??