Bankruptcy Rules Thwart the Recovery

Why should management have a monopoly over restructuring proposals?

By CARL C. ICAHN

The epic financial crisis afflicting the banking industry over the past 18 months is largely the result of cratering loan and other asset values stuck on bank balance sheets. When the market for such loans stalled, banks couldn't sell them and had to take billions of dollars in writedowns.

Fearing the worst, the government pumped hundreds of billions of dollars into these institutions, with questionable long-term results. Though it is early in the rescue, the economy has shown few signs of improvement, and the bank losses continue.

Why should taxpayers foot the bill when there are trillions of dollars in private money on the sidelines in the world financial markets? Private investment is a far more appropriate agent to revive these institutions, yet little is coming in.

One reason for this is that distressed assets on bank balance sheets have artificially low values because of misguided federal bankruptcy laws. With a few changes, the banking system could enjoy a revival backed by private investment, not public funds.

The problem is that, in this bear market, the prospect of a bankruptcy puts a huge damper on investor appetite for debt securities in overleveraged companies. This includes hundreds of billions of dollars in bank and bond debt issued for leveraged buyouts.

This state of affairs could be improved by eliminating the bankruptcy rule known as the "exclusivity" period. This rule unfairly gives managements, with court approval, a monopoly in drawing up a reorganization plan for a minimum of 18 months. Generally that plan includes proposals to restructure debt, sell assets and void onerous contracts. During this period nontrade creditors, like bank debt and bond holders, languish in uncertainty as to what will happen to their investment.

The exclusivity rule mainly benefits equity holders and managements, not creditors. But why should the same management that got the company into trouble have the right to lock-up its assets for an extended period of time?

Without an exclusivity period, different classes of creditors and equity holders could immediately propose different restructuring solutions, including the sale of assets overseen by a bankruptcy court. The biggest impact of such a rule change would be that the assets of a company in Chapter 11 would be priced as though they could be sold -- in effect giving them a "mergers & acquisitions premium" -- rather than be shackled for years in a bankruptcy court.

This change would cause many distressed loan prices to rise -- bolstering the balance sheets of banks and other companies that hold these loans -- without public money. Furthermore, such a change would slash the need for expensive bankruptcy lawyers, restructuring firms, and other advisers, who can reap tens of millions of dollars in fees -- often at the expense of creditors and company treasuries.

It is one thing to apply the exclusivity rule to small businesses in the hopes that an individual who has spent his life building a business has a chance to keep it. But it is unfair that huge private-equity players can use this same rule to put into limbo billions of dollars of debt that banks lent to finance once-healthy companies.

If equity holders bet and lost, then debt holders should be able to come in quickly and salvage the company and their investment. In the long run, this would be good for companies, credit markets, employees and the communities in which companies are located.

Few are helped by the exclusivity rule, other than desperate equity holders and top managers clinging to the helm of companies that faltered on their watch. Eliminating exclusivity would not necessarily lead to more company liquidations, but it would take away the monopoly management has on formulating restructuring proposals.

It would also force managements to redouble their efforts to stay out of Chapter 11 -- which would be a good thing. Chapter 11 is often a crutch for lackluster managements. Changing the rules would put pressure on them to keep their companies healthy.

I have long argued for increased shareholder rights and last year founded United Shareholders of America to advocate strengthening those rights. In this case I argue for increased creditor rights. But the thinking behind both is identical. In both cases it allows market forces to work better, both in pricing securities and in eliminating management monopolies in company affairs.

We must allow market forces to do their job, which includes promoting the ability of the rightful owners of assets -- not just managements -- to control their fate to the maximum extent practical. The idea is to efficiently maximize the value of the assets through operational changes, restructuring or sale to third parties.

Today, troubled assets are stuck in a quagmire and will be for years unless bankruptcy laws are changed. The capitalist system is the most efficient wealth-producing machine in existence. We must strive to remove barriers that thwart this efficiency.

Mr. Icahn is chairman of Icahn Enterprises, a publicly traded diversified holding company.

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破產法阻礙復甦進程
2009年01月19日09:20


Carl C. Icahn

過

去18個月裡席捲銀行業的大規模金融危機主要是由於銀行資產負債

表中的貸款和其它資產價值出現深幅縮水的結果。當此類貸款的市場凍結時﹐銀行無法銷售這些資產﹐被迫沖減數十億美元的資產。

由於擔心出現最壞的情況﹐政府向這些機構注入了數千億美元資金﹐不過長期結果卻值得懷疑。儘管這些救助措施採取得很早﹐但經濟並未出現多少改善的跡象﹐銀行也在繼續虧損。

在全球金融市場還有數萬億美元的私人資金處於觀望之時﹐為什麼要由納稅人來買單呢？私人投資是救助這些機構更合適的機構﹐不過這部分資金卻基本沒有介入。

出現這種情況的一個原因是﹐銀行資產負債表中的問題資產的價值被人為壓低了﹐而其癥結就在於誤導性的聯邦破產法。只要做出一點改變﹐銀行體系就能獲得由私人資本、而非公共資金支持的復蘇。

問題在於﹐熊市中企業破產的前景大大阻礙了投資者購買槓桿比率過高的公司所發行債券的興趣。這包括銀行中的數千億美元債券和為槓桿收購公司發行的債券。

這種情況可以通過取消破產法中的“排他性”規定而得到改善。這種規定不公平地讓管理層在法院的批准下可以有最少18個月獨家制定重組計劃的時間。這種計劃通常包括重組債務、出售資產和取消繁瑣的合同的提議。在此期間﹐無權參與交易的債權人﹐如銀行債券的持有者會對他們的投資所存在的不確定性感到心力交瘁。

排他性規定主要對持股者和管理層有益﹐而不是債權人。但讓公司陷入困境的這些管理者為什麼有權這麼長時間鎖定他們的資產呢？

如果沒有了排他性規定﹐不同類型的債權人和持股人就能立即提出不同的重組方案﹐其中包括出售由破產法院監督的資產。修改規則帶來的最大影響將是﹐對於進入破產保護程序的公司﹐其資產可以按照出售進行定價──實際上相當於讓它們獲得了併購溢價──而不是在破產法院中被束縛多年。

這一改變將可推升許多不良貸款的價格﹐從而支撐銀行和持有這些貸款的公司的資產負債表﹐而又不必動用公眾的錢。此外﹐這一改變還可使破產企業不必在破產律師、重組公司和其他顧問人員身上繼續耗費重金﹐這些機構往往會從破產交易中收取數千萬美元服務費﹐這筆錢常常要由債權人和破產企業來買單。

破產法中的排他性規定對小企業是合理的﹐因為這會使花畢生精力創辦了企業的人有機會保住自己的公司。但將這一規定用於那些規模巨大的私人資本運營公司就有失公平了。借助這條規定﹐它們會將銀行在破產企業正常運營時貸給它的款一筆勾銷。

如果持股人投資失利﹐那麼債務持有人應能做到儘快介入並挽救該公司和他們的投資。長期而言﹐這將對企業、信貸市場、雇員和企業所在的地區都有益。

排他性規定幾乎對誰都沒有好處﹐除了陷入絕望的持股人和死抓住在他們的治理下落到如此境地的公司不願放手的最高管理層。消除排他性未必會導致更多的公司破產案﹐但它將消除管理層在制定重組計劃方面的專斷。

它還將迫使管理層加倍努力避免公司進入破產保護程序﹐這將是件好事。破產保護常常是落魄的管理層借以支撐的拐杖。改變規定將帶給他們壓力、促使他們盡力保持公司健康運行。

長期以來﹐我一向支持加大股東權力﹐去年我成立了美國股東聯合會(United Shareholders of America)﹐倡導強化股東權力。現在來說﹐我還認為要強化債權人的權力。但兩者背後的想法都是一致的。兩種情況下﹐它都能讓市場力量更好地發揮作用﹐不論是在證券的定價還是在消除管理層對公司事務的專斷方面都是如此。

我們必須讓市場力量發揮它們的作用﹐包括提升資產的正當所有人（而不僅是管理層）在最大可行程度上掌握他們的命運的能力。關鍵是通過調整經營、重組或向第三方出售來有效實現資產價值的最大化。

眼下﹐問題資產深陷泥潭﹐如果不改革破產法﹐它們將在那裡呆上數年。資本主義體系是現存的最有效率的財富創造機器。我們必須努力消滅那些削弱這種效率的障礙。


(編者按﹕本文作者是Icahn Enterprises董事長。該公司是一家涉足多個領域的上市控股公司﹐已上市。)