AgFeed Industries files for Chapter 11

New York residents who invest in AgFeed Industries may want to take note of the business filing for bankruptcy. The hog producer, which is based in China but has interests in the United States, has filed forChapter 11 bankruptcy. Chapter 11 enables businesses to continue operations while reorganizing and restructuring their debt. Based on the filing, AgFeed has $127 million in assets, but they have $27 million in debt. One of the issues that led to the company filing for bankruptcy was a contractual dispute with a major hog buyer, Hormel. According to Hormel, AgFeed inflated the price of hogs by overstating production costs. AgFeed countered that Hormel was sending them unhealthy young hogs. In spite of the fact that an arbitrator sided with both parties, Hormel was ultimately awarded $8 million, which was subtracted from what Hormel owed AgFeed. However, disputes with Hormel were only part of the company’s financial difficulties. It was discovered in 2011, thanks to an internal investigation initiated by the AgFeed’s board of directors, that there were bookkeeping irregularities associated with the company’s Chinese operations. The investigation showed that the company was over-reporting profits by undermining the amount of bad debt owed to the company… Continue reading

GateHouse Media to file Chapter 11, then form new company

GateHouse Media Inc. has filed Chapter 11 and has plans to restructure its $1.2 billion debt. The company owns hundreds of local websites and more than 400 community newspapers. Newcastle Investment Corp. owns 52 percent of the company’s debt and plans to combine GateHouse’s media group with 33 other publications it purchased from News Corp. for $87 million. It plans to form New Media, a publicly traded company created from all the operations Newcastle spun off. According to Newcastle, the newly formed company would benefit from cost cuts and digital revenue, and in over three years, it would be able to invest $1 billion to purchase more shopping publications and newspapers at a discount. The Chapter 11 bankruptcy came about after the 2008 financial crisis, when GateHouse became over leveraged. However, the past few years has revealed doubled digital revenue and a $150 million cut in costs. Although total revenue fell five percent for fiscal year 2012, digital revenue increased to almost 27 percent for the entire year. Creditors are supporting the reorganization, and they have the option of cashing their stock at 40 cents on the dollar or converting their positions to stock in GateHouse. New Media is expected… Continue reading

Lehman Brothers bankruptcy still lingering

After failing to secure a government bailout or locate a buyer, Lehman Brothers Holdings Inc. filed for Chapter 11bankruptcy on Sept. 15, 2008. The $2 billion price tag for winding down the massive holdings of the New York-based investment banking firm has eclipsed the $757 million in bankruptcy costs incurred by the previous record holder Enron. While some critics feel that the fees being charged in the Lehman bankruptcy case are unusually high, a professor at the University of Illinois’ College of Law pointed out that the typical percentage paid in fees for Chapter 11 bankruptcy cases is approximately two to four percent of the assets of the company filing for bankruptcy. In the case of Lehman Brothers, the $2 billion in fees is far less than that percentage when compared to the company’s $639 billion in assets. A bankruptcy attorney also noted that highly chaotic bankruptcies are typically more expensive than less complex cases. According to the 2011 court approved liquidation plan, creditors hoping to recover some of the money that they lost as a result of their dealings with Lehman Brothers are currently scheduled to receive a payment equaling approximately 18 cents for every dollar that they are… Continue reading

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