Under
the federal bankruptcy code, a debtor has 180 days to submit a plan of
reorganization without having to worry about competing proposals from
creditors.
Billionaire Icahn feels such exclusivity is stinting
the economy and hurting taxpayers. Eliminate it, he writes, and private
investors will be more interested in buying bankrupt companies,
transferring the burden from the federal government in many cases and
stimulating the languishing economy.
While the securities of
bankrupt companies can rightfully repel investors concerned about their
low values, Icahn writes that abolishing this rule could boost the
value of distressed loan prices by allowing them to be "priced as they
could be sold." The effect of this would be the strengthening of
balance sheets without public money.
"It is one thing to apply the
exclusivity rule to small businesses in 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 refinance
once-healthy companies," Icahn writes.
Fair point. And we add
another: Often exclusivity only gives the management that led a company
down a troubled path an opportunity to compound their mistakes.
Lawmakers are working on passing bankruptcy code modifications
that would stave off foreclosures for millions of homeowners. But it's
not likely they will take up Icahn's cause. Despite what may be sound
arguments, Icahn isn't exactly loved in Washington, going back to his
days as a corporate raider. More importantly, the code was overhauled
in 2005 after years of haggling and debate. It's not likely a wholesale
change of the type Icahn is after will inspire Congress to revisit
those days anytime soon. - Carolyn Okomo
America's
bankruptcy laws would look a whole lot different if corporate raider
and self-styled shareholder activist Carl Icahn had a say in it. Icahn
is no stranger to bankruptcy. He has put companies he owns into it, and
he's bought many an asset out of it. And he thinks giving a debtor an
exclusive period to submit a reorganization plan stinks. Or so he
writes in a recent piece on The Wall Street Journal's op-ed page. 
