From time to time, we like to look at the stocks of companies that have emerged out of Chapter 11 bankruptcy proceedings. We thought it would be good to make that at least an annual event, and so we discuss below those companies that "graduated" from Chapter 11 in 2007, plus a few from late 2006. Post-bankruptcy stocks can be attractive for several reasons. The bankruptcy process gives a company the opportunity to solve its problems and reshape its business. As a result, the company that emerges out of Chapter 11 is often much stronger than it was before filing for bankruptcy. Did you buy Apple at $7.82? George Putnam did. Click here for his latest buys in cable TV and industrial chemicals.
Despite that, most investors shun the stocks of companies coming out of Chapter 11 because their analysis is tainted by memories of the poor performance leading up to bankruptcy. There can also be artificial selling pressure as former creditors (such as vendors, bondholders and banks), who were paid off with stock, unload that stock to raise cash. Special Offer: Find out why George Putnam recommends selling shares of Sony and buying into this auto parts supplier in the middle of a turnaround. Click here for the complete portfolio and updates via email hotlines in the Turnaround Letter.
Below are all the companies emerging out of Chapter 11 in 2007 that have publicly traded stocks with market capitalizations above $25 million. Since the class of 2007 is relatively small, we’ve also included the companies that emerged during the last quarter of 2006, some of which look particularly interesting. Many of these stocks are quite thinly traded (particularly those listed in the Pink Sheets or on the Bulletin Board), but they may become more actively traded as they get further away from Chapter 11.
..Through the bankruptcy process, Visteon's old shares were canceled, and, as part of the plan, old shareholders were issued only 1 million new shares. That's 2.5 percent of the company, plus warrants to buy 1.6 million in new shares. In the end, shareholders received about 61 cents per share. :)