Successful Companies that have Declared Bankruptcy
People are often quick to assume that bankruptcy is a financial death sentence. That is why they often get confused when they hear a major company is filing for bankruptcy but see them continuing to do business. The fact is bankruptcy is not what many people think. Its purpose is to allow conscientious debtors another chance at success.
Bankruptcy is the safety net that allows individuals and businesses to take well-calculated risks without facing permanent financial destitution when those risks don’t work out. That is why numerous well-known companies have filed for Chapter 11 bankruptcy during their lifetimes — some multiple times. Yet many of these companies reform, reorganize and often become successful again later on.
A perfect example is Paramount Pictures, which in the 1930s faced bankruptcy after incurring substantial debt during aggressive expansion. Nevertheless, Paramount emerged from bankruptcy more streamlined and to this day continues to be one of the leading motion picture studios in the United States.
More recently in 2010, the iconic MGM Studios filed for Chapter 11 bankruptcy to deal with over four billion dollars of outstanding debt. MGM successfully negotiated with its creditors to emerge from bankruptcy after about 30 days. They now continue to be a leading producer of television and feature films.
Risk is an essential part of business. But even reasonable and well-calculated risks can lead to substantial debt when things break the wrong way. Bankruptcy exists so that businesses and individuals can take the risks that are a driving force of our economy without facing financial ruin if economic plans do not pan out as expected.