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Number of “Chapter 22” filings jumps

Companies that file for bankruptcy don’t always emerge strong enough to withstand the rocky economy

An increasing number of companies are experiencing déjà vu when it comes to bankruptcy., which tracks bankruptcy filings, found that the number of companies filing for “Chapter 22”—meaning they’re filing for Chapter 11 a second time—has jumped in the first two months of 2012. Four of the 17 public companies that have filed for bankruptcy this year are repeat filers. A total of six companies filed for “Chapter 22” in 2011.

In mid-January, Wonder Bread- and Twinkie-maker Hostess Brands Inc. filed for bankruptcy a second time just two years after its first filing. The company cited the weak economy and pension- and medical-benefit cost obligations as factors in its “Chapter 22” filing. The three other repeat filers this year include Buffets Inc., known for its family-style restaurant chain Old Country Buffet; ocean shipper TBS International; and boat-maker Fountain Powerboats Industries Inc.

Experts say companies typically have to file for bankruptcy a second time when they still have too much debt after their first Chapter 11 filing. Some companies even end up filing for bankruptcy a third time, such as the clothing retailer Filene’s Basement, which filed for “Chapter 33” and ended up liquidating in late 2011.

Ed Altman of the Stern School of Business at New York University told Thomson Reuters that he expects more repeat filings this year as companies have been using bankruptcy as a means of cutting debt and not addressing other operational problems. 

Ashley Post

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