Strategic bankruptcy
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A strategic bankruptcy may occur when an otherwise solvent company makes use of the bankruptcy laws for some specific business purpose.[1] For example, in 2002 Kmart filed chapter 11 for protection from creditors; however one of the main problems affecting Kmart's cash flow and therefore liquidity was that they were locked into long term leases at premium rates with respect to various unprofitable stores. While in chapter 11 reorganization, Kmart was able to renegotiate or rescind those particular leases.
[edit] See also
[edit] References
- ^ See Kevin J. Delaney, Strategic Bankruptcy (University of California Press, 1998) for a discussion of this phenomenon by reference to particular cases.
