Dennis Connolly was quoted in The Deal Pipeline in an article discussing companies that purchase a debtor to infuse more capital into the business—only to end up back in bankruptcy court. According to the article, “of the 31 companies that made repeat bankruptcy filings in 2012, at least 14, or nearly half, did so after experiencing a change of control after they petitioned the first time.”
“In quick sales, they really haven’t fixed the company…some of the operational fixes that are necessary simply aren’t done,” Connolly explained.
Connolly advised, “Companies oftentimes are hoping to charge through the bankruptcy court as quickly as possible with hopes of trying to keep down the administrative costs…the longer a company lingers in bankruptcy, the more fees it racks up.”
He noted that buyers often will initiate a second bankruptcy for a company they acquired during a first bankruptcy because further restructuring could help them achieve more value in the company.