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Non-Tech : FTL- Fruit of the Loom
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To: gao seng who wrote (158)11/6/2001 9:16:52 AM
From: Clement  Read Replies (1) of 161
 
Unfortunately, the one big problem with your argument is that there has already been a restructuring plan in place. The shareholders have no say. The A-L=E equation needs revisiting. The Buffett plan is contingent on a completion early next year which is why the company has asked the judge for an early acceptance of the plan. The plan calls for the equity to be wiped out. The majority of debtholders support the plan and favor Buffett.

The company is bankrupt. The pre-bankruptcy shareholders have no rights because they defaulted on their debt. Bankruptcy is not a democracy -- the shareholders lose the most because the debt holders are superior in claims. The only way for shareholders to come out with anything is if all the debt is paid off - or the debtholders are satisfied. Some people think this is not fair but in essence what has happened is that the shareholders through the company have broken a contractual agreement that says they must pay $x interest / $x principal -- so the debt holders have taken over the company.

This company will only be strong after emerging from chapter 11 because it will have recapitalized. The company is in bankruptcy in the first place -- not because of the business -- but the money they borrowed to support expansion into unrelated businesses. This in turn jeopardized their core business because it was not able to support so much debt.
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