Finova Group, Inc. (A)

Case Solution

Stuart C. Gilson, Perry L. Fagan
Harvard Business School ()

Finova Group, a $ 14 billion commercial finance firm, filed for Chapter 11 in early March 2001 in one of the largest bankruptcy filings of all time in the United States and the largest corporate bond bankruptcy since Great Britain. Depression. While in Chapter 11, Finova became the subject of heated bidding competition. As part of the finally accepted reorganization plan, “Berkadia” (a partnership between Leucadia National Corp. and Bershire Hathaway of value investor Warren Buffet) sponsored a massive recapitalization of Finova and provided a $ 6 billion guaranteed loan to support the purchase of unsecured banks and bond creditors. In exchange, Berkadia received 51% of the common shares of the reorganized company and control of the board of directors. No new business development was planned. However, several companies represented in the proceedings believed that the company could have significant business value and feared that Berkadia would acquire it at an artificially low price. During the bankruptcy, so-called “vulture investors” bought a large part of Finova’s debt and equity rights, which they hoped to influence the outcome of the proceedings.

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