chapter 11: April 2009 Archives

Beleaguered auto manufacturer Chrysler filed for Chapter 11 bankrupty protection today in a move encouraged by the Obama administration. The bankruptcy filing is intended to rapidly clear Chrysler's debts and smoothe a path to a partial acquisition by Italian automaker Fiat.

Chrysler, which received billions of dollars from the United States government, then asked for more to stay afloat, is now conceding an inability to meet its obligations. Chrysler will idle its production lines for an extended period while the company restructures. In an interesting twist, the reorganized company will become majority owned by its employees via an independent trust controlled by the United Auto Workers union's healthcare fund. Fiat and the US government will own the rest.

No announcements have been made at this time regarding Chrysler's product lines or dealer network.

Luxury jewelry maker Doris Panos filed for bankruptcy under credit pressure. The company, which has been in business since 1993, creates high-end merchandise often sported by celebrities and profiled in fashion magazines. Doris Panos is sold at Neiman Marcus and other specialty outlets.

In a sure sign of the recession's impact, a huge mall owner has filed for bankruptcy. General Growth Properties filed for Chapter 11 protection in what the Wall Street Journal is calling "one of the largest real-estate failures in U.S. history." General Growth is the nation's second-largest mall operator, behind Simon, and owns 200 malls including Boston's Faneuil Hall.

The bankruptcy filing is not supposed to affect mall operations or sales. But it could have an impact on consumer confidence, and shoppers may shy away from General Growth's malls, leading to a latent sales decline at the stores within them. The bankruptcy proceedings could take years due to the size of the company's holdings.

Ultra Diamonds' parent company Ultra Stores filed for bankruptcy protection due to the now-expected liquidity and economic concerns. The company has defaulted on some loans but stated it had financing to temporarily continue operations. Cost-cutting maneuvers have been underway since the 2007 holiday season, long before the economic crisis hit.

Ultra Diamonds runs the jewelry counters at such stores as Filene's Basement and Burlington Coat Factory and has 181 locations.

Fatburger's California and Nevada subsidiaries filed for bankruptcy and are in need of loan restructuring. Indications are their Fatburger locations, 32 in all, will stay open during the proceedings. The bankruptcy affects more than a third of all Fatburger stores.

Youth cosmetics manufacturer Jane & Company filed for Chapter 11 bankruptcy due to poor liquidity. Jane reportedly has $25 million in annual sales from items like its "Makeover in a Box." The company, which sells its products at mass-market level, is restructuring its debt and plans to continue operations while seeking a buyer for the business.

In Alabama, Big 10 Tires filed for bankruptcy protection, citing insufficient operating funds. The tire retailer has 104 retail stores across three southern states. Big 10 Tires plans to keep its doors open while negotiating rent and debt relief.