Abstract
I. MOTIVATION FOR STUDY This study highlights the importance of substantive consolidation doctrine to large public company bankruptcies. In substantive consolidation, the intercompany liabilities of the subject companies are eliminated, the assets of these subject companies are pooled and the third party liabilities of the subject companies are satisfied from this single pool of assets. This pooling of assets changes the percentage recovery, for better or worse, that individual creditors would receive in the absence of a consolidation. 1 The doctrine's significance is difficult to gauge merely by examination of published court opinions. 2 Indeed, in the two cases that provide the most widely accepted statements of the conditions for application of the rule, the court does not approve substantive consolidation as a remedy. 3 This study attempts to measure the extent to which large public company bankruptcy reorganization negotiations take place in the shadow of the doctrine of substantive consolidation, despite the judicial rhetoric of rarity. 4 Two sources for business bankruptcy data--WebBRD 5 and BankrupcyData.com 6- -do not maintain separate data specifically tracking substantive consolidation. 7 I am not aware of other data sources that might track this information. 8 BankruptcyData.com often reports on substantive consolidation as part of its summary of reorganization plans; however, that source can offer no assurance that this feature is always reported upon when present or that its review, particularly of older matters, is comprehensive. Research to date confirms that BankrutpcyData.com does not ...