Michael Bruder has been yelled at, hung up on and hustled quickly out of offices.

A bill collector might expect such treatment. But it is not what Bruder, a company turnaround expert for Macquarie Capital USA, expected when he entered the field of corporate restructuring.

It is Bruder's job to tell chief executives that a bankruptcy filing may be the best option to save their struggling company since it can protect them from lawsuits and creditors. He's finding it's not an easy pitch.

You can dance around it a little bit, but a lot of times you get very harsh pushback, said Bruder, who heads Macquarie's New York restructuring and special situations group.

Business bankruptcies soared 63 percent in 2008 from the year before, as the global recession, consumer spending slump and near freeze in the market for business loans hit companies hard, according to law firm Jones Day. The number is expected to climb again this year, according to Macquarie Capital research.

But despite a weak economy, which might provide cover to executives, shame, pride or hubris prevent corporate chieftains from letting their companies file for bankruptcy protection, even when stalling can delay a turnaround or result in a total collapse.

We probably did take longer (to file for Chapter 11) than we should have because you never want to have that feeling of failure and you always want to fight it out, said Joseph Vicens, chief operating officer at bankrupt 1800mattress.com, which sells bedding over the phone, Internet and stores.

Vicens said a company turnaround was delayed by three to six months since filing earlier would have helped it get out of expensive real estate leases and other obligations.

The lag had also caused creditors to force the issue by filing an involuntary Chapter 7 petition against the company, asking a court to appoint a trustee to take over operations. 1800mattress.com had to respond to the creditor's move by filing for Chapter 11 and is now planning to sell itself to competitor Sleepy's.

You can call it wishful thinking, but we basically thought we could work this through internally, said Vicens. No one wants to go through a Chapter 11.


Executives, especially those who started a business, believe they know a company better than any outside adviser possibly could. They resist admitting that they weren't as nimble as they should have been when business first began slowing, and they fear the stigma of failure attached to bankruptcy will follow them throughout their career.

Bankruptcy is also expensive since companies have to pay for their own legal counsel, management consulting help, attorneys for the credit committee and other advisers.

They always wait too long, said William Henrich, vice chairman of corporate turnaround adviser Getzler Henrich & Associates LLC.

Restructuring pros cite the example of electronics retailer Circuit City, which had to liquidate after late attempts to fix its finances and find a buyer failed.

Calling in restructuring advisers or filing for bankruptcy earlier could have allowed the company to streamline its business or address expensive real estate agreements, said Heidi Sorvino, head of the New York bankruptcy practice for Smith, Gambrell & Russell LLP.

Now look at what they've done -- they've liquidated all those people out of work, all those stores closed, all those leases rejected, Sorvino said.

Financial pros hired to fix a struggling company come girded with business degrees and a deep understanding of balance sheets.

But their most useful skills are often more therapeutic.

You have to understand the motives, agendas and objectives because you are trying to compel people to do things they were otherwise un-inclined to do, said Henrich. The real success in helping a company manage a turnaround or a bankruptcy is really, truly the psychological part of it.

Bruder of Macquarie Capital has a spreadsheet that helps him identify the desires and fears of all parties affected by a corporate restructuring.

And Sorvino draws on skills developed from her Master's degree in clinical social work when she works with clients.

Admitting failure is really tough, she said. A lot of them are in disbelief. (They say) 'How could this happen?'


But if executives swallow their pride and go into bankruptcy court with a good reorganization plan, companies can have a better chance of surviving a turbulent economy.

You can't wait to file, said Sorvino, adding that an early bankruptcy filing can preserve cash and prevent judgments from creditors.

Companies can be so crushed by debt and litigation -- and filing for bankruptcy puts a stop to that, she said.

Vicens of 1800mattress.com said that the mood at the company and among its creditors and vendors has improved since it filed for bankruptcy.

It stops the uncertainly everywhere, said Vicens. We feel at ease since we filed the Chapter 11 because we know that we can focus on moving forward. The past is the past.

Struggling businesses can turn to a so-called prepackaged bankruptcy, in which a company works out a deal with its creditors then files in bankruptcy court with all the agreements in place. A prepack helps a company emerge more quickly and with much less disruption to operations.

Bankrupt telephone equipment maker Nortel Networks Corp is seen as an example of a company that moved when it still had cash on hand and thus will have a better chance of restructuring successfully.

Some restructuring pros also say bankruptcy is a good option for struggling automaker General Motors Corp, which is limping along even after billions of dollars in aid.

GM has said a bankruptcy filing would wipe out thousands of jobs, but some turnaround specialists insist that a well-thought-out bankruptcy filing would allow the company to reinvent itself.

Bankruptcy is a process where companies have the opportunity to reorganize themselves, get out from heavy debt loads, renegotiate labor contracts, said Jerry Mozian, national segment leader of restructuring for executive services firm Tatum LLC. This is the time when everyone needs to be thinking outside the box.

But not all companies, or their executives, are willing to take such early measures.

You get yelled at, you get the 'Who the hell are you?' speech, said Bruder. We had a CEO who said to us, 'I have a solution and it's not bankruptcy. We're just going to run faster.' And six weeks later they were in bankruptcy.