Bankrupt Companies Now Look Like Great Bargains

Improving economy pulls companies from the brink
By Kevin Spak,  Newser Staff
Posted May 13, 2010 8:18 AM CDT
Six Flags' bondholders looked like they'd be wiped out a year ago; now, they've grabbed control of the chain.   (AP Photo/Ed Reinke)

(Newser) – For big, public companies, it's a good time to be bankrupt. With earnings skyrocketing—77% of the S&P 500 has beaten expectations so far this quarter—a lot of companies that had been left for dead suddenly have life, and their shareholders have a fighting chance of keeping their shirts, the Wall Street Journal reports. They're arguing that the companies' rising fortunes should boost their valuation, leaving equity behind for them.

A year ago, the frozen credit markets forced companies like Linens 'N Things to liquidate to appease creditors, but now that the spigots are open again, companies have not only been surviving in Chapter 11 bankruptcy, they've been thriving, posting ever-growing earnings. “It's such a dramatic lift, and it's not just coming from one direction,” said one investment bank official. “That's why you've got these valuation fights.”

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