Deck 12: Restructuring in Bankruptcy

Question 1

A reorganization plan in Chapter 11 is part of a larger document called a disclosure statement.

Answer 1

True

Question 2

George and Hwang found that firms with high distress costs had:

A)Lower leverage
B)Lower probabilities of default
C)None of the above
D)Both a and b

Answer 2

D

Question 3

The debtor in possession is another name for the bankrupt company.

Answer 3

True

Question 4

Which of the following bankruptcies were related to fraud?

A)Parmalat
B)Enron
C)Refco
D)All of the above

Question 5

Tashjian, Lease, and McConnell found that pre-voted prepacks:

A)Spend less time in bankruptcy court
B)Devote more time to prefiling negotiations
C)Have lower direct costs as a fraction of assets
D)Have higher recovery rates
E)All of the above
F)Both a and c

Question 6

A prepackaged bankruptcy may also provide tax benefits because net operating losses are treated differently in a workout than in a bankruptcy

Question 7

The initial exclusive period is how many days:

A)90
B)30
C)120
D)None of the above

Question 8

Creditors seeking payments from a company in reorganization bankruptcy in the United States must file:

A)Schedule TO
B)Chapter 11 form
C)Proof of Claim
D)None of the above

Question 9

Laws regulating corporate reorganization in bankruptcy are more liberal from the corporate debtor's perspective in the United States than in Europe and Canada.

Question 10

Andrade and Kaplan found that the causes of financial distress can be traced to:

A)Managerial hubris
B)Financial leverage
C)Nonstrategic deals
D)Diversification
E)Both c and d

Question 11

Larger companies tend to do better in Chapter 11 bankruptcy than smaller ones.

Question 12

DIP financing refers to financing of leveraged buyouts.

Question 13

The Crystal Oil Company was the first major prepackaged bankruptcy.

Question 14

In Chapter 11, when an automatic stay has been granted creditors cannot seize the assets of bankrupt companies without getting court approval.

Question 15

Denis and Denis show that while poor deal pricing was a factor in the failure of firms in the very early 1990s, the 1990-1991 recession was the primary cause.

Question 16

Dun & Bradstreet showed that which of the following are causes of business failure?

A)Economic factors e.g., industry weakness, insufficient profits)
B)Financial factors e.g., heavy operating expenses, insufficient capital)
C)Neglect e.g., poor work habits, business conflicts)
D)Fraud
E)All of the above

Question 17

In the United States, a company may only file for Chapter 11 bankruptcy protection one time.

Question 18

Which of the following are drivers of economic failure?

A)Revenues less than costs
B)Return on investment below costs of capital
C)Profitability below expected levels
D)All of the above

Question 19

Which of the following is the largest bankruptcy in history?

A)Continental Airlines
B)Worldcom
C)Lehman Brothers
D)None of the above

Question 20

In the United States, the rules governing corporate reorganizations are detailed in which part of the bankruptcy law?

A)Chapter 13
B)Chapter 11
C)Chapter 9
D)None of the above