TMA Poll: U.S. Bankruptcy Law Chorus Is Off-Key

CHICAGO, Feb. 10, 2011 /PRNewswire-USNewswire/ -- As the pitch rises over the question of whether to allow states to file for bankruptcy, most turnaround professionals voicing their opinion blend together on a single note: No.

Nearly 70 percent of respondents to a recent Turnaround Management Association poll think struggling states would need to sound a theme other than bankruptcy to solve fiscal problems aggravated by the recent recession. But 32 percent join a refrain in favor of enacting a U.S. bankruptcy law for states, arguing that it would deftly address onerous union contracts and debt levels and drown out any pleas for federal bailouts.

"Allowing states to file bankruptcy to eliminate similar legacy issues that have plagued some major corporations forced to file bankruptcy in recent years will just shift the burden of these liabilities from the states to the federal government without ever addressing the underlying problems," said TMA President Mark S. Indelicato, a managing partner with Hahn & Hessen LLP in New York.

In contrast, nearly all (97 percent) respondents expect to see a rising crescendo of municipal filings under Chapter 9 of the U.S. Bankruptcy Code in 2011.  Only three percent think otherwise, in harmony with financial pundits who say recent investor pullback from municipal bond markets arises from new bonds being issued and driving down prices, and not just cash-strapped cities. Fears of financially imploding cities, they say, amount to shrill noise.

"Desperate municipalities are looking for solutions to their debt problems leading more of them to consider Chapter 9 filings," said Patrick C. Lagrange, immediate past TMA chairperson and managing director with Carl Marks Advisory Group LLC in New York City. "However, 10th Amendment-based restrictions on this process limit court powers. The hard political choices of cutting services or raising taxes still need to be made regardless of whether a Chapter 9 proceeding is initiated."

Chicago-based Turnaround Management Association (www.turnaround.org), the only international non-profit association dedicated to corporate renewal and turnaround management, has more than 9,000 members in 47 regional chapters, including turnaround practitioners, attorneys, accountants, investors, lenders, venture capitalists, appraisers, liquidators, executive recruiters and consultants.

SOURCE Turnaround Management Association

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