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To: SargeK who wrote (50995)	9/12/1999 7:04:00 PM
From: Razorbak	Respond to of 95453

HMARQ Debate... Odds of Re-emergence Sarge: Articwarrior: “I believe that the odds are more for a 1 in 6 probability of success in HMAR than an even odds event.”... Perhaps you would share with us information you have that Hvide Marine Management and the rest of us are not privy to. I actually believe Artic's assessment of a 1 in 6 probability of success may be a little optimistic when compared to bankruptcy statistics. Ref: "Fewer Seek Chapter 11. Most Never Recover", The Business Journal, Jacksonville, FL (American City Business Journals), ©1997. amcity.com While personal, or Chapter 7, bankruptcies continue to skyrocket, the number of area businesses filing for Chapter 11 protection is dropping faster than the national average. Businesses, however, continue to face tough odds getting back on their own feet after Chapter 11, according to local bankruptcy attorneys and business executives. Since 1990 the number of filings in U.S. Bankruptcy Court for the Middle District of Florida dropped more than 42 percent, beating the 18.4 percent national decline reported by the American Bankruptcy Institute. "There's more breathing room to recapitalize today," said Foley & Lardner attorney Gardner Davis. "When companies are in trouble there's more money to access. It seems that everyone and his brother wants to lend or to invest in a private equity fund." Davis was one of the attorneys representing American Body Armor, now Armor Holdings Inc., when the Jacksonville manufacturer of bullet proof vests and other security equipment filed for Chapter 11 protection from creditors in 1992. Fifteen months and $700,000 later, the company successfully completed its reorganization plan. "Every CEO should go through the process once. It teaches a lot of discipline. But once is enough," said Jonathan Spiller, Armor Holdings' president and chief executive. During the bankruptcy process, the company stock was trading around 50 cents a share and at 79 cents when the process was completed. On June 23 the stock (AMEX: ABE) closed at $10.50. "The worst part was keeping our self respect and the respect of our customers. We were always having to justify it. There always seemed to be a competitor sending one of our customers notice that we had filed for bankruptcy. But we were very lucky because we had a very loyal customer base," Spiller said. Armor Holdings was able to fully repay all its creditors, and the stigma eventually goes away, he said. "But we as managers never forget and we are more aware of every action we take." But Armor Holdings' success story is rare. Most of the 674 companies that filed Chapter 11 from 1990 to 1996 in U.S. Bankruptcy Court here rolled on into Chapter 7 liquidation, local attorneys said. Local retailer Pic N' Save was the latest large casualty. The 47-year-old Jacksonville company filed for Chapter 11 protection in February 1996 and converted to Chapter 7 the following January. "What happened with Pic N' Save is what happens with lots of little companies too. It's a horrible experience, the pressures are unbelievable," said Westside attorney Lance Cohen, who estimates that only 5 percent to 6 percent of Chapter 11 cases are successful. "Most debtors are unable to fulfill their obligations. They continue to operate. But what's changed with management? What's changed with cash flow? Unless the owners realize that they're going to have to change the way they do business, reorganization isn't going to work," he said. "Sometimes the business proves to be more valuable by liquidating," Davis said. "Just keep the heart beating long enough to sell the corpse." Hope this information helps you understand the historical odds of re-emergence from a Chapter 11 bankruptcy. I'll address the issue of typical time frames in my next post. Razor

To: SargeK who wrote (50995)	9/12/1999 7:58:00 PM
From: Razorbak	Read Replies (2) \| Respond to of 95453

HMARQ Debate... Expected Time Frame for Chapter 11 Sarge: Re: Your clipped quote from the recent HMARQ news release... "The Company anticipates that it will complete its restructuring and emerge from Chapter 11 in late 1999 or early 2000." In my experience, most Chapter 11 proceedings are quite lengthy, and many last for more than two years unless they are converted to a Chapter 7 case early in the process and the assets are subsequently liquidated. Ref: "Chapter 11 - Reorganization", United States Bankruptcy Court, Central District of California, December, 1998. cacb.uscourts.gov Who Can File a Plan There is no specific statutory time limit set for the filing of a plan; however, the debtor (unless a "small business" debtor, as set out above) has a 120-day period during which it has an exclusive right to file a plan. The debtor's exclusive period in which to file a plan may be extended or reduced by the court. After the exclusive period has expired, a creditor or the case trustee may file a competing plan. The United States trustee, however, may not file a plan. 11 U.S.C. Section 307. A chapter 11 case may continue for many years unless the court, the United States trustee, the committee, or another party in interest acts to ensure its timely resolution. The creditors' right to file a competing plan, however, provides incentive for the debtor to file a plan within the exclusive period, and acts as a check on lengthy delay in the bankruptcy. ... Motions Prior to confirmation of a plan, there are several activities that must take place in a chapter 11 case. The continued operation of the debtor's business may lead to the filing of a number of strongly contested motions. The most common are those seeking a lift of the automatic stay, the use of cash collateral, and to obtain credit. There may also be litigation over executory (i.e., unfulfilled) contracts and unexpired leases, and the assumption or rejection of those of those executory contracts and unexpired leases by the debtor in possession. 11 U.S.C. Section 365. Delays in formulating, filing, and obtaining confirmation of a plan often often cause creditors to file motions for relief from stay or motions to convert the case to a chapter 7 [liquidation] or dismiss the case altogether. FWIW, my last Chapter 11 bankruptcy engagement had been ongoing for 17 months before my firm was hired to sell the business for the benefit of the estate. The courtroom was literally filled with angst. The debtor-in-possession's reorganization plan had been rejected, competing plans had been submitted, and numerous motions had been ruled upon by the judge. At that time, the judge was so sick of the case that he was threatening to convert it to a chapter 7 liquidation just to stop all of the squabbling. As a compromise, he hired my firm, and then appointed a case trustee, removing control over day-to-day operations from the former debtor-in-possession. Long story short, we successfully sold the business to a hungry competitor in a "Section 363 sale". This involved an in-court auction amongst three competing bidders. During the auction process, each of the bidders sequentially bid up the value of the business until two of the parties dropped out and one was declared the eventual winner, with the winning bid ending up 36% higher than the opening bid submitted only 1-1/2 hours earlier. The auction occurred three months after our engagement began, and the case was finally closed three months after the auction. Total time in Chapter 11 was 23 months. All post-petition administrative claims (e.g., my professional fees, attorneys' fees, etc.) were paid in full. Secured creditors got out whole. Unsecured creditors took a significant haircut, receiving 20 cents on the dollar. Shareholders got zilch. I sincerely hope this doesn't happen to Hvide Marine, but such occurrences are not uncommon in bankruptcy cases. Razor