Business bankruptcy Chapter 11 filings soared over the past 18 months as the country confronted its deepest recession in decades. With capital markets closed and equity sitting on the sidelines, many debtors merely turned their businesses over to the senior lenders. It appeared bankruptcy law’s post-1978 empowerment of incumbent managers had given way to a new era of pre-bankruptcy negotiated delivery of control to creditors, leaving the filing of the case as a mere tool to deliver the keys. Some recent court cases have shown that the perceived demise of the debtor-in-possession may have been premature.
In In Re TCI 2 Holdings LLC , Donald Trump, an experienced user of the Chapter 11 bankruptcy process, found the three Atlantic City casinos associated with his name in bankruptcy for the third time. In bankruptcy parlance, this is affectionately known as “Chapter 33.” Trump prevailed over Icahn Partners in the ensuing high-stakes battle for control.
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