Famous Corporate Bankruptcies Part 3

By: Timothy McFarlin | Published: January 5th, 2012 | Category: Bankruptcy

Refco

Three months after going public, Refco filed for chapter 11 bankruptcy protection. The New York based financial Services company’s financial downfall was attributed to a wide scale financial fraud involving Refco’s CEO and chairman, Phillip Bennett. Bennett hid over $430 million in bad debt. At the time of filing for bankruptcy protection, Refco’s assets were $33.3 billion and their debt totaled $16.8 billion.

 

Lehman Brothers

The bankruptcy case of Lehman Brothers, the global financial services firm remains the largest bankruptcy filing in U.S history with $600 billion in assets. The news of their bankruptcy filing caused financial stocks to plummet world-wide. In March 2010, a 2,200-page document explained how Lehman used accounting sleight of hand to conceal the bad investments that led to the firm’s undoing. In the report, which was compiled by an examiner for the bank, it is concluded that, among other issues, the main reason for the firm’s demise was the result of bad mortgage holdings and demands by rivals like Citigroup, and JPMorgan Chase that Lehman Brothers post collateral against loans it desperately needed.

 

IndyMac Bancorp. Inc

The Pasadena based IndyMac Bancorp, was once one of the largest mortgage lenders in the U.S. IndyMac specialized in “Alt-A” home loans, which often did not require borrowers to fully document either their income or assets. When the rate of defaults increased, the lender eventually collapsed. On the heels of U.S. Sen. Charles Schumer’s comments questioning IndyMac’s survival, $1.3 billion of deposits were withdrawn by customers over 11 business days. Once federal regulators seized the company, they filed for chapter 7 bankruptcy protection. At the time of filing, IndyMac’s assets totaled $32.7 billion, and its liabilities ranged between $100 million and $500 million.

 

Semgroup

Tulsa, Oklahoma-based oil marketing company SemGroup, filed for bankruptcy protection in July of 2008 after succumbing to $3.2 billion in losses on derivatives trades that were supposed to safeguard its physical oil trading business and energy futures. High crude oil prices and a volatile credit market were cited as reasons for the bankruptcy filing. At the time of SemGroup’s bankruptcy filing, their assets were $6.1 billion and their liabilities were $7.5 billion.

 

Delphi

Delphi, the largest auto parts maker in the U.S, filed for bankruptcy in 2005. Delphi’s bankruptcy case was shrouded in controversy. The company was originally established as a spin-off of GM. It became a publicly traded corporation in 1999. Yet, the company has remained dependent upon GM for a significant portion of their sales. Some critics say that the creation of Delphi was to simply, prepare for a large round of layoffs and wage cuts at both companies, and also to shift pension obligations from the parent company to its spin-off. With Delphi’s bankruptcy filing, the company was able to accomplish all of this without union approval. The fact that just a day before filing for bankruptcy, Delphi increased the severance packages for 21 top executives claiming that it would be needed to keep them loyal to the company, made critics even more suspicious of Delphi’s motives.

 

Northwest Airlines

Minutes after Delta Airlines announced that it was filing for bankruptcy, Northwest Airlines filed for bankruptcy. Northwest, the fourth largest carrier in the U.S., was plagued with the same financial difficulties as Delta. They were unable to sustain the increase in fuel prices; this along with high labor costs, and fierce competition among low-cost carriers made bankruptcy the airlines best option to get back on their feet. Northwest Airlines emerged from bankruptcy in May of 2007, and in April of 2008, Delta and Northwest announced their merger.

 

Los Angeles Corportate Bankruptcy Attorney

At Mcfarlin Law, we offer free corporate bankruptcy consultations to prospective clients. Let us put our experience to use for your company. Call us today at (888) 728-0044 or email us here.

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