Bankruptcy is a formal process geared toward preserving stakeholder value. Often, the proceedings include negotiations between stakeholders that are arduous, time-consuming and expensive. As such, the main focus during bankruptcy tends to be on completing the process, rather than positioning the company for healthy and sustainable growth after emergence.
This limited focus is certainly understandable, given all the pressures and constraints that accompany bankruptcy. And it is amplified by the rise of pre-packaged and pre-arranged bankruptcies, which primarily focus on solving capital structure challenges (with minimal attention to operational changes to the business). However, some of the constraints that companies operate under during bankruptcy may be self-imposed or driven by conflicting priorities that restrict management’s options and limit the ability to grow and thrive post-bankruptcy.
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