Companies buy Northwest debt
BANKRUPTCY: Small businesses that are owed money by the airline are selling their claims to compensation for small percentages.
BY MARTIN J. MOYLAN
ST. PAUL PIONEER PRESS
ST. PAUL - Like thousands of other small businesses, the janitor supply firm that Lisa Needels runs was stiffed when Northwest Airlines filed for bankruptcy in September.
Also left with unpaid Northwest debts were hotels, taxi companies, upholsterers, bars, restaurants, luggage delivery services, caterers, ice suppliers and a multitude of other businesses. Who gets paid what and when will be sorted out as Northwest works out its reorganization plan in a New York bankruptcy court.
Needels figured it could be years before her business, Needels Janitor Supply in St. Paul's Lowertown, would get some of the $201.09 Northwest owed her for scrubbing pads and other supplies.
She was wrong. She has been promised a check for 25 percent of the debt. Other businesses report they've received offers for as little as 10 percent and as much as 32 percent of what they're owed.
Needels sold her claim to Trade-Debt.net, one of the firms that has been busy buying creditors' claims against Northwest. Needels will be happy to get $51.28 for her claim.
"If it was for more than $200, I would probably be upset," she said of what she expected to collect from Northwest. "It was not a significant enough amount to wait for."
Debt buyers are regular players in big corporate bankruptcies. Sometimes referred to as "vulture" investors, the firms can make money on the spread between what they pay for creditor claims and what they eventually collect on them.
"They're very sophisticated and can make a lot of money," said George Singer, a corporate bankruptcy attorney with the Lindquist & Vennum law firm in Minneapolis.
The longer a bankruptcy goes on, the more claims traders will be pitching unsecured creditors to sell their claims at a discount, Singer said.
Hundreds of small, unsecured creditors have sold claims ranging from $100 to $10,000. Unsecured creditors don't have anything they can take back from Northwest to recover what they're owed. These creditors stand to get paid just a fraction of their claims. In the recent United Airlines bankruptcy, for instance, unsecured creditors received eight cents on the dollar, payable in new United stock. United's stock has done better than expected, though, increasing the recovery rate of creditors who've sold shares.
Eagan, Minn.-based Northwest expects creditor claims against it eventually will run into the billions of dollars. It says it won't start getting a firm handle on the amount until after Aug. 16, the deadline for most creditors to file claims.
The airline gave the debt-buying firms a tremendous hand earlier this month. It submitted a more than 25,000-page filing that identifies about 170,000 individuals, business, government entities and other organizations that are -- or could be -- creditors.
The filing provided contact names and addresses. Deb Danko who runs the D'Animal House, an Apple Valley, Minn., kenneling service, is owed $11,105 by Northwest. She figured she would be lucky to get 10 percent of that money, years from now. She did much better.
ASM Capital first offered Danko 20 cents on the dollar for her claim. She was ready to accept it. But then she received another letter from ASM. It offered 32 percent. Danko accepted.
"I wasn't expecting to see anything from it anyway," Danko said. "I figured some money is better than none. I guess they have a better outlook on the airline than I do."
BANKRUPTCY: Small businesses that are owed money by the airline are selling their claims to compensation for small percentages.
BY MARTIN J. MOYLAN
ST. PAUL PIONEER PRESS
ST. PAUL - Like thousands of other small businesses, the janitor supply firm that Lisa Needels runs was stiffed when Northwest Airlines filed for bankruptcy in September.
Also left with unpaid Northwest debts were hotels, taxi companies, upholsterers, bars, restaurants, luggage delivery services, caterers, ice suppliers and a multitude of other businesses. Who gets paid what and when will be sorted out as Northwest works out its reorganization plan in a New York bankruptcy court.
Needels figured it could be years before her business, Needels Janitor Supply in St. Paul's Lowertown, would get some of the $201.09 Northwest owed her for scrubbing pads and other supplies.
She was wrong. She has been promised a check for 25 percent of the debt. Other businesses report they've received offers for as little as 10 percent and as much as 32 percent of what they're owed.
Needels sold her claim to Trade-Debt.net, one of the firms that has been busy buying creditors' claims against Northwest. Needels will be happy to get $51.28 for her claim.
"If it was for more than $200, I would probably be upset," she said of what she expected to collect from Northwest. "It was not a significant enough amount to wait for."
Debt buyers are regular players in big corporate bankruptcies. Sometimes referred to as "vulture" investors, the firms can make money on the spread between what they pay for creditor claims and what they eventually collect on them.
"They're very sophisticated and can make a lot of money," said George Singer, a corporate bankruptcy attorney with the Lindquist & Vennum law firm in Minneapolis.
The longer a bankruptcy goes on, the more claims traders will be pitching unsecured creditors to sell their claims at a discount, Singer said.
Hundreds of small, unsecured creditors have sold claims ranging from $100 to $10,000. Unsecured creditors don't have anything they can take back from Northwest to recover what they're owed. These creditors stand to get paid just a fraction of their claims. In the recent United Airlines bankruptcy, for instance, unsecured creditors received eight cents on the dollar, payable in new United stock. United's stock has done better than expected, though, increasing the recovery rate of creditors who've sold shares.
Eagan, Minn.-based Northwest expects creditor claims against it eventually will run into the billions of dollars. It says it won't start getting a firm handle on the amount until after Aug. 16, the deadline for most creditors to file claims.
The airline gave the debt-buying firms a tremendous hand earlier this month. It submitted a more than 25,000-page filing that identifies about 170,000 individuals, business, government entities and other organizations that are -- or could be -- creditors.
The filing provided contact names and addresses. Deb Danko who runs the D'Animal House, an Apple Valley, Minn., kenneling service, is owed $11,105 by Northwest. She figured she would be lucky to get 10 percent of that money, years from now. She did much better.
ASM Capital first offered Danko 20 cents on the dollar for her claim. She was ready to accept it. But then she received another letter from ASM. It offered 32 percent. Danko accepted.
"I wasn't expecting to see anything from it anyway," Danko said. "I figured some money is better than none. I guess they have a better outlook on the airline than I do."
preferential treatment in regards to their claims. If they screw them, then I doubt there will be much ‘trust’ in future ScabSistence. It would also be interesting to know what other ‘unions’ assisted in this debacle without forethought as to their complicity.
