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OH NO! a restaurant chain files for bankruptcy

Vern

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“Fox & Hound Restaurant Group filed for Chapter 11 bankruptcy to sell its assets through a court process, as weakening profit and cash shortage hurt the sports bar and pub operator, a court filing showed”

Sports bar operator Fox & Hound files for bankruptcy - Yahoo Finance

Oh no, Fox and Hounds files for bankruptcy protection. Oh no, the chain will cease to exist. Wait, they may have DIP financing to fund their bankruptcy.

“F&H also sought court approval for a Debtor-In-Possession (DIP) facility, which will provide it with a revolving credit facility of about $3.5 million on an interim basis and about $9.6 million on a final basis.”

Whew! good thing for them they only needed 10 million to make it through bankruptcy. They are so lucky they didn’t need 50 billion in the worst recession since the depression from someone willing to fight with the govt over who gets paid back first because the govt gave them a 20 billion ‘bridge’ loan. Double whew!
 

Oh Vern. You are such a bankruptcy expert.

A debtor in possession facility is purely a private transaction - no government money involved. The bankrupt company finds a private lender that is willing to loan the company enough cash so that it can maintain operations long enough to complete an asset sale of a going operation. The lender is essentially in possession of the company. The bankrupt company needs the court's permission to enter into such a loan because the lender insists on taking first position ahead of all other creditors upon settlement of the asset sale. The court agrees to this if it believes that the sale value of the operating company is likely to be sufficiently greater than the liquidation value that all creditors come out ahead after the lender is fully paid. When it is all over Fox and Hound will be gone; its creditors will be partially paid (presumably maximized because the court allowed the debtor in possession facility); and some of its restaurants will be operating under new ownership and new names.

Unfortunately, I got to learn about this the hard way. I agreed to manage a company (that I previously sold) through a "voluntary bankruptcy leading to asset sale". The big bank first position creditor and our supplier creditors agreed amongst ourselves that I would direct the continued operations until the company assets could be sold as an operating entity. We avoided the involvement of bankruptcy court because we all found a way to work together - but we essentially did the debtor in possession Chapter 11 scenario. In the end the creditor debt write off was only about 1/3 what it would have been if the company had liquidated when it first defaulted on its senior debt and about 25 jobs were saved as well as the asset buyer continued the business operation.

Bankruptcy is a scenario that nobody wants. But once it is upon you, the management mission is to minimize the creditor losses and maximize workforce that gets to go forward. Debtor in possession is often the best way to achieve these goals.
 
The Fox and Hound concept was a tough one to make viable. They focused on full service dining too much and beverage service too little. The key to making a restaurant work is to turn tables or charge enough so that they don't have to be turned as often. Fox and Hound was trying to turn a profit by having people hang out while spending $40 a table. That's a guaranteed fail for any restaurant.
 
WhyNotWhyNot said:
Oh Vern. You are such a bankruptcy expert.
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thank you that explanation of DIP financing but where did I dispute anything you posted? But since you seem to have a grasp on Chapter 11 and DIP financing, who had 50 billion to loan to GM to fund their bankruptcy in the worst recession since the depression with a collapsed financial system to prevent GM from being liquidated?

And on top of that, who would have been willing to fight with the govt over who gets priority to be paid back? Not many people know that Bush "claimed" or "tried to claim" that his 20 billion loan to GM would 'convert' to DIP financing in case of bankruptcy.

"“
U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
“
GM, Chrysler May Face Bankruptcy to Protect U.S. Debt (Update5) - Bloomberg

would you agree that chances of someone willing to put up 50 billion were greatly reduced by the complication of the Bush loan from Dec 2008?
 
Fox & Hound and GM/Chrysler are like comparing apples to donuts. Keep spinning that strawman argument.
 
WhyNotWhyNot said:
Bankruptcy is a scenario that nobody wants. But once it is upon you, the management mission is to minimize the creditor losses and maximize workforce that gets to go forward. Debtor in possession is often the best way to achieve these goals.
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so I guess you agree with the auto bailout? (maybe that's an easier question)
 
Vern said:
so I guess you agree with the auto bailout? (maybe that's an easier question)
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Yes I do (did). And also the old Chrysler loan "bailout". For the most part I would prefer if the gov't would not become entwined in the private sector. But there are times when it is the proper pragmatic thing to do (even if it makes your philosophic stomach wrench). It really is a case by case business decision. In the automobile industry instances that we are discussing the fed's judged well. We should remember that American business competes in a world of gov't owned businesses. The Canadian Gov't owns many businesses. The French gov't and many European gov'ts have controlling ownership of very large multi-national businesses. The Japanese do it. Of course the Chinese gov't owns a minimum of 50% of every business activity in China. We allow these foreign gov't owned businesses easy conduct of business in the US where they compete in our large industries like the automobile industry. Our private businesses have a significant cost of capital disadvantage in these competitions. Upon occasion our gov't may need to provide some temporary assistance in these competitions with other governments when the very existence of our industry is at stake.
 
They don't have this chain by us.
 

There are people who turn down life saving medicine or treatment because it’s against their religion. I regard these people as nuts. And if they tried to impose their religion on me, I would regard them as dangerous. Why would saving 2 million jobs, preventing a double dip recession and saving the country billions of dollars “turn your stomach” philosophically?

It just seems to me that if your religion or ideology made you want to do something that was detrimental to yourself or others, then there is something wrong with your religion or ideology.
 

Because it goes against the heart of Laissez Faire capitalism, that's why.
 

It ultimately is a fundamental question of preserving individual liberty and freedom that makes opportunity creation in our society possible. The American Dream is that people can pursue their individual visions of a better world constrained only by time proven Western Civilization principals of behavior that we accept as appropriate and necessary to have a peaceful and prosperous society.

Government then has two roles. The first is to codify our basic principles into laws that must evolve constantly as individuals pursuing new ideas also create undesirable byproducts. The second is to take actions to stimulate idea creation upon which future generations will advance our prosperity.

The countries that have policies where the government owns businesses are either attempting to abridge individual initiative in their societies (China, Venezuala, etc.) or are trying to create international trade (export) advantage (France, Canada, Japan, etc.) (we call that “dumping” when we have trade disagreements with them).

The problem with a policy of government ownership of businesses is that it destroys opportunity by discouraging individuals from pursuing business creation. Who is going to start a business in competition with a government? Who is going to start a business if the government may one day become a competitor? How can you set a price for your product when the government business that you are competing with has free capital (taxes) and may not have to make a profit to survive?

As I am sure you have noticed, I frequently post excerpts from a collection of essays that I wrote a couple years ago. One of those essays is titled “Home of the Free”. It discusses a key point that Alexis de Tocqueville made in his famous 1835 book “Democracy in America”. Essentially, Tocqueville suggested that control of society could be slowly transferred to the government when dilution of political accountability (such that accountability to a single voter is negligible) was coupled with a consensus desire to live tranquilly and pursue individual prosperity. This transfer of society control to the government occurs slowly and subtly each time that we fear that our tranquility is threatened. Tocqueville worried that eventually the accumulation of power in the government would result in despotism by default. In many aspects of our lives we have failed to heed this warning, or its reincarnation written by George Orwell, or President Eisenhower’ s farewell speech warning. That is why our stomachs should wrench every time we consider government (even temporary emergency) ownership of business.
 
WhyNotWhyNot said:
The problem with a policy of government ownership of businesses....
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great speech except for one thing, our govt didn't own GM. It owned stock in GM. If you want to 'contest' that point try to do it more succinctly. Also, President Obama made a point to sell that stock as quickly as possible to allay concerns like you expressed even though a more patient approach would have reduced the cost.
 

Obviously you are clueless to the fact that owning stock (called shareholders) in a corporation reflects actual ownership in a corporation.

Lord have mercy - my 10 y/o understands this concept.
 

One of your post said you felt it's okay for government to help out US companies because other countries do it. Then you say the above.

Basically, you're saying it's okay for the taxpayers to bail out business as long as they never recoup their tax money back? At least when the government bought the shares, the tax payers were able to recoup back some of the money vs none if the shares were not purchased.
 
SMTA said:
Obviously you are clueless to the fact that owning stock (called shareholders) in a corporation reflects actual ownership in a corporation.

Lord have mercy - my 10 y/o understands this concept.
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I understand very well that as a stockholder I 'own' a share of a business. But Why was comparing owning stock to countries where the companies are owned and operated by the govt. As I stated, in this case we simply owned shares of stock (and temporarily at that). If you are unable to ascertain the difference then have your 10 y/o explain it to you.
 

99.99% of stock is temporarily owned.....hello!

Better to take ownership when loaning money rather than loaning money with no collateral.

Difficult concepts for some to comprehend.....
 

The French gov't owns stock in Areva, the largest nuclear company in the world. They own 90% of the Areva stock - hence they control who is on the board and who the officers are. That is owning the corporation. The Feds owned enough stock in GM to dictate who would be directors and officers - that is owning the corporation.

By the way the French use Areva to control the worldwide nuclear market including building very strong penetration into the US.
 

I accept that there are times when effective governance requires pragmatism that may compromise principle. When that is the case we must make sure: 1) it is absolutely sure that it is an emergency measure, 2) we are sure that it is temporary and we know how to define the end of the emergency, and, 3) it is limited / strongly bounded so that it cannot expanded or become recurrent. If those conditions are met I am willing to support actions about which I have great trepidation.
 

That is nonsense and directly contradicted by the Preamble of the Constitution
 

My concern was you weren't willingly to allow the tax payers to recoup the money. For instance, the government recovered a portion of taxpayer money and it went back toward regular expenditures rather than back toward profits for the private industry.
 
MaggieD said:
In hindsight, who could not agree?
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If you would kindly peruse the “Treasury sells lasts shares. closes book on successful profitable auto bailout “ thread you would see who doesnt agree even in hindsight
 
SMTA said:
99.99% of stock is temporarily owned.....hello!

Better to take ownership when loaning money rather than loaning money with no collateral.

Difficult concepts for some to comprehend.....
Click to expand...

thank you for arguing ‘word choice’ again and ignoring the point. Let me try this. It was made clear that our investment in GM or the banks was temporary and we didn’t “make the day to day decisions” (contrary to the lying republican narrative concerning the volt). Why mentioned Countries that are greatly involved in business or operate entire industries and mentions Areva in France (a good example would be that Mexico owns and operate Pemex) These are not “one time/temporary” things like our investments in GM and the banks. So read this slowly (or have your 10 y/o explain it to you) so I’m comparing the investments in GM to Pemex or Areva or any company in China.

Remember the same guys ‘warning’ you about “rampant socialism” and “nationalizing industries” are the same liars that told you:
President Obama was born in Kenya
His BC was fake
9-11 could have happened to anybody
if we didn’t immediately cut spending in 2009 we would have hyper inflation, collapse of the dollar and a market going to zero
President Obama wanted to kill old people

Oh and they also like to argue ‘word choice’ to quickly deflect from the facts.
 
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