Why Not File Chapter 11? A Few Million Reasons ...

In a column on CBS Marketwatch today (Aug. 14), reporter Bambi Francisco recommends Chapter 11 as a solution for struggling telecom companies. In her second paragraph, she urges Exodus, Level 3 and MFN to "seriously consider this legal tool."

"So, why not just file?" Francisco writes in her column, titled "Why Chapter 11 Can Be A Good Thing."

"Chapter 11 should be considered by many debt-burdened firms to help nudge the process of creating social value, not just shareholder value," she adds.

Why not just file? There are millions of reasons - known as investors and owners. Sure, skilled lawyers and executives can use the bankruptcy code as a tool to negotiate favorable resolutions to a company's financial challenges. Yes, filing sooner rather than later offers certain advantages.

But bankruptcy also allows a company to escape financial obligations that ought not be shed so cavalierly. When they accepted huge amounts of money from venture capitalists, bondholders and the investing public, these companies made commitments that they should work long and hard to uphold - rather than racing to escape them once the business environment turns difficult.

It's a hard thing for a company to recognize when it is past the point of no return and needs to file Chapter 11. Some battle on too long, leaving little chance of a successful reorganization. In hindsight, some executives may wish they'd acted earlier.

Chapter 11 is a better option than liquidation. When those are the remaining choices, companies must accept the inevitable and use the courts to try and salvage a future for themselves, their employees and their investors. But Chapter 11 is never a "good thing."