Case Study: Revco Bankruptcy

769 Words 4 Pages
LP4.2 Assignment: Ford Case Study: REVCO BANKRUPTCY
Willy Muhigirwa
National American University – Online

Introduction

It’s not an easy fact to know the cost of a formal bankruptcy, depending on the company it can be very expensive and can take a long time before its finalized, it’s really a time-consuming. Revco was in bankruptcy for a long time we can said for almost 4 years and paid out a lot of money directly around $40.5 million after spending also four years.
According to US courts website: “a chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment
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Rite Aid must provide a provision of $ 163 million to cover integration costs.
This consolidation completes a movement already started in 1994 with the acquisition by Revco of a chain of 800 Hook-SupeRx stores for about 600 million. In February, Rite Aid bought Perry Drug Stores for $ 132 million.
Researchers Berk & Demarzo (2014) have on stated that once a firm fails to make a required payment to debt holders, it is in default. Debt holders can then take legal action against the to collect payment by seizing the firm’s
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Among many indirect costs of financial distress, we can include the loss in the customers, the distractions in management, also the reputation of the company. These types of indirect costs of financial distress can happened when the bankruptcy is declared formally or no. In this situation of Revco, financial distress caused a costly change in management and strategic direction within the company. What complicated the Costs of bankruptcy for Revco is the Financial Structure, the company had senior subordinated debts as well as junior subordinated debt, which make it hard for the company claimholders to agree to an out-of-court settlement. They could not also easily come up with a private agreements as other retailer store because of the big number of trade

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