Second Acts

After bankruptcy, companies often teeter between encore and final curtain call.

Enron

Enron filed December 2001, has until June 30 to file a reorganization plan.

The Plan: After trying to sell off major assets as a single entity, Enron switched gears and announced plans to form both an international energy company and a domestic pipeline operating company. It will continue to shop around unrelated properties. With its fourth deadline extension, a more-detailed plan is due to the court by the end of this month.

The Prognosis: The intangibles that drove Enron’s onetime $80 billion market value will be hard to re-create. And deriving value from current assets may be no easier, if its initial asset sale is any indicator: UBS Warburg took Enron’s trading operations (which accounted for 90 percent of revenue) in January 2002 for nothing but the promise of future profit-sharing. “We’re not expecting much to come of Enron — they’re pretty much done,” confides one turnaround expert.

Conseco

Conseco filed December 2002, on track to emerge in June 2003.

The Plan: Last year Conseco sold off its finance unit (which filed separately for Chapter 11) and is seeking to emerge as an insurance-only company. Its plan, approved in March, calls for slimming down debt from $6 billion to $1.4 billion and growing revenue slowly, from $4.38 billion to $4.43 billion in 2005, while turning a profit. Estimated market value: $3.8 billion.

The Prognosis: A $7.8 billion loss in 2002 and a court battle with Donald Trump over ownership rights to the jointly held General Motors building in New York haven’t helped. However, Standard & Poor’s director Jon Reichert is “pleasantly surprised” at bankruptcy’s impact on insurance sales, down only about 2 percent last year. His main concern? Steep interest payments.

Epilogue
How companies fare after bankruptcy.
Company (when exited Chapter 11) What Happened Next Stock Price
Comdisco (8/02) After selling its IT-services division to Sungard in 2001, decided to liquidate and pay off creditors by 2005. So far, has sold $2 billion in assets and redeemed over $1 billion in debt. $165 OTC
Covad Communications (12/01) The Internet service provider emerged with $1.4 billion less debt, but operating cash flows have stayed negative, at $74 million in 2002. $1.27 OTC
Finova Group (8/01) The former financial-services group is in the process of liquidating assets. Having sold about $800 million so far, finally turned a profit in 2003. $.16 OTC
ICG Communications (10/02) Debt dropped from $2.8 billion to $303 million, but the Internet and phone company will need $70 million over the next two years to cover remaining obligations, according to its exit plan. Now planning to lay off up to 20 percent of its workforce. $5 OTC
Loews Cineplex (3/02) Acquired by Toronto-based investment firm Onex, the theater chain is now private, but filed to go public and issue more bonds last August. NA
Rand-McNally (4/03) After reducing debt by $250 million during its two months in bankruptcy, the mapmaker was taken private by Leonard Green & Partners. NA
Sunbeam (12/02) Now American Household, creditors including Bank of America, Wachovia, and Morgan Stanley took control of the home-appliances maker after its second Chapter 11 filing in 2001. NA
Vencor (4/01) Core operations have turned profitable since Vencor, now Kindred Healthcare, emerged. However, it’s hampered by reduced Medicare payments and professional-liability costs. $17.97
Nasdaq
Washington Group International (1/02) Despite filing for bankruptcy twice in six years, the construction giant wiped out all of its debt and generated a profit last year. Future looks solid, with more than $1 billion in new contracts. $20.15
Nasdaq
Williams Communications Group; now Wiltel (10/02) Bankruptcy took the telecom giant’s debt from $5 billion to under $600 million. With a $250 million cash balance and negative cash flow, some analysts expect to see it in Chapter 11 again. $10.60
Nasdaq

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