Saving Whitton

October 1, 2011 – In The News
Turnarounds & Workouts

The recent strategy used by Whitton Corp., a Nevada real estate company, may set the precedent for others looking to reorganize under Chapter 11.

"By merging several single-asset real estate companies, Whitton Corp. avoided onerous restrictions that bankruptcy law places on property owners with only one asset," said Hal Baume.

The key to the company's successful reorganization lies in the fact that it reorganized prior to filing Chapter 11, which "limited the ability of each mortgage lender to block reorganization and foreclose on properties used as collateral," said Baume.

"What appears to have occurred here is a restructuring of the entities in order to preserve and reorganize, and to take advantage of Chapter 11 rather than abuse it," said Judge Bruce Markell in the hearing transcript.

Baume notes that the strategy won't work for every business, but will for those entities "that have a realistic chance of reorganizing, but need the time and the same kind of negotiating position with lenders that non-single-asset real estate debtors enjoy."

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