Made in USA once meant cars, washing machines and software. Now another US offering that is gaining global popularity is corporate bankruptcy.Within the past year, a number of foreign-based companies looking for protection from creditors and a chance to restructure themselves, filed for bankruptcy in US Courts.‘‘We used to make TVs and export them,’’ said Gibson, Dunn and Crutcher partner Conor Reilly. Now, the thing we do better than anyone else is bankruptcy.’’ The US Courts hold increasing appeal for foreign-based distressed companies for several reasons. First, while bankruptcy laws in most other countries favor liquidation, the US Bankruptcy Code has evolved into one of rehabilitation. Also, many foreign-based companies turn to American courts because they have US creditors who are subject to decisions of courts in the US.‘‘That is why foreign companies have started to, and I think will, use Chapter 11 as a vehicle to do it,’’ said Reilly, who recently returned from Europe, where he spoke to companies about U.S. Bankruptcy procedures. Colombian Airline Avianca and Bermuda-based companies FlagTelecom Holdings Ltd and Global Crossing Ltd., Canadian company Teleglobe Inc. and closely held British ferry company Cenargo International PLC are among the most recent foreign-based companies to file for Chapter 11 bankruptcy protection in the US.Had Cenargo filed for bankruptcy in Britain, it would have come under British law, which until recently had tended toward liquidation. ‘‘The professionals there are still geared up for liquidation,’’ Reilly said.Neither the US Courts nor research firms such as Bankruptcydata.com keep statistics on foreign-based companies filing in the US.‘‘One way or the other, the companies are out of money and unable to execute a business plan without traditional relief and protection,’’ said Brad Scheler, a partner in Fried, Frank, Harris, Shriver & Jacobson. The US Bankruptcy Code allows a foreign company with a residence, place of business, domicile or property in the United States to file for Chapter 11 protection, whereby it can restructure its business, obtain financing to keep going, and tackle its debt problems, while keeping bills at bay. Still, the system also has its detractors, who say the laws give badly run companies too many chances to start over. (Reuters)
