CFO Blog: Commentary and Opinion

You are here: Home : CFO Blog : Bankruptcy Timing Is Everything

Bankruptcy Timing Is Everything
Posted by Marie Leone | | US
September 15, 2005 5:33 PM ET

By declaring bankruptcy, and then defaulting on its pension payment obligation, Northwest Airlines made it likely that employees will not recover $65 million worth of benefits.

According to a report in The New York Times, the government would have had a stronger claim on the pension money if Northwest had delayed the Chapter 11 filings "by even one more day." As it stands now, the government — in the form of the Pension Benefit Guaranty Corp. — becomes an unsecured creditor, relegated to the back of the line in the bankruptcy pecking order to recover funds, behind secured creditors.

As the Times explains, "Had Northwest skipped the payment outside of bankruptcy, it would have been in violation [of pension law]," and the Pension Benefit Guaranty Corp. could have swooped in and placed a lien on the assets, giving employees a better shot at recovering their pension money.

In the wake of the Northwest and Delta bankruptcies, it seems quite possible that pensioners and their activist lawyers will be challenging the rules of pension and bankrutpcy law.

Comments (1)

Comments | Post a Comment
Posted by Vikas Kulkarni | September 16, 2005 10:00am

previous post next post
How I Fell Into the Uncanny Valley of Digital Marketing
Gold Medal Whining
Happy Birthday, iPhone; Bye, Bye BlackBerry
Happy Birthday, iPhone; Bye, Bye BlackBerry
This Is An Angry, But Positive Blog
« NOVEMBER 2017 »
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30   
Email to a Colleague
  Printer Friendly Version  
  RSS Feeds  
CFO Daily Briefing
Capital Markets/Banking
Notify me of future events
Enter your email address to begin receiving updates on these topics.