We were opposed to government bailouts during the great recession. Bankruptcy works, and we believe the system would have taken care of itself.
Our beliefs are bolstered by recent bankruptcy news, in which three well-known debtors have emerged from bankruptcy to hopefully resume profitable operations.
California Pizza Kitchen, which has a location in Milwaukee’s Bayshore Town Center, filed Chapter 11 in July, primarily due to the pandemic. The company eliminated debt by swapping that debt for equity in the new company. Its hopes are that a revised menu, emphasizing healthy and meatless items, will revitalize the casual dining enterprise.
Cirque du Soleil has also emerged from bankruptcy. It is no surprise that a circus might not do well during a pandemic. The company filed Chapter 11 in June and has now reached agreements with its creditors.
The best known of these companies successfully reorganizing is J. C. Penney. The department store retailer filed bankruptcy in May, having lost money in eight of the last nine years. Much of its extensive real estate holdings is being transferred to creditors and landlords.
These are just a few of the examples of how bankruptcy works successfully. We know, because we keep businesses in business. The new subchapter V form of Chapter 11 is already making it easier for small businesses (those with less than $7.5 million in debt) to restructure.