Connecticut–based Maclaren USA, which produced the Maclaren-line of baby strollers, at one time, saw its fair share of the toddler-toting industry. After a list of babies losing their fingers and related suits had accumulated, however, a mass recall of strollers was launched in 2009. Eventually, the once-trendy company had no choice but to seek bankruptcy relief.
Things got so bad that the company was forced to file chapter 7 in late December 2011. In a chapter 7 case, the debtor seeks to liquidate its assets–usually at fire-sale prices–to provide some form of distribution to creditors. But, there is no remaining going-concern company at the conclusion of the case. In contrast, in a chapter 11 case, the debtor generally tries to continue as a going concern by restructuring its obligations through a plan of reorganization. Because of its choice–or apparently lack of choice–MacLaren is now liquidating its assets in bankruptcy court.
Interestingly, although a very popular company at its height, Maclaren listed just $45,413 in assets against $15.9 million in liabilities in its voluntary petition. While the Maclaren approach is not the preferred method of dealing with litigation through bankruptcy, which generally stays all litigation against a debtor, sometimes the litigation facing a company becomes so pervasive that in addition to the legal costs involved, the name of the company becomes so damaged as to jeopardize its going concern value. That appears to be what happened with Maclaren.
Categories: Bankruptcy Filings