It's Chapter 11 bankruptcy protection for Bearingpoint

Bearingpoint, originally KPMG Consulting, has filed for Chapter 11 bankruptcy protection. According to a company press statement, the firm has filed a voluntary Chapter 11 petition in the Southern District of New York as part of a pre-arranged restructuring plan with its lenders. Operations outside of the U.S. will not be affected.

The consultancy has been publicly wrestling with its multibillion dollar debt burden since October, when it engaged turnaround adviser AlixPartners to develop a rescue plan, according to blogger Francine McKenna, who used to work for Bearingpoint.

The options on the table included selling all or part of the company or a restructuring of its existing convertible debt for equity. In the absence of any meaningful offers, Bearingpoint was forced to choose the second option. Under the new package, all the firm's existing equity will be cancelled "for no consideration" and its lenders bankers will receive preference shares in return for a new $402 million facility.

Bearingpoint has labored under some kind of corporate curse since it spun out of KPMG during the heady days of the dotcom boom, our sister site, AccountingWEB.co.uk reports. Its public offering in February 2001 raised $2 billion. Most of the profits from the listing went to the accountancy wing, leaving the consultancy with thin cash resources to build its infrastructure. With Internet start-ups luring away its people, KPMG lost $26.9 million on a turnover of $2.37 billion that year, but that didn't stop an expansion program that included the purchase of remnants of Andersen's consulting operation following that firm's demise.

In 2005, McKenna noted, Bearingpoint was the subject of SEC concern over its financial reporting practices and stock option treatments.

"Bearingpoint have filled the rumor mill for some time (however), this is still quite a shock," analyst Richard Holway told IT World. "With new projects on hold, management consultants, who often have as bad a reputation as bankers, are an easy first target for cost cutting. But this must set the alarm bells ringing in many a marbled hall right now."

You may like these other stories...

I recently talked with Doug Sleeter about the current state of the small business consulting profession. We talked about how consultants have great opportunities for competitive differentiation by taking full responsibility...
By Shawn Moriarity, Senior Consultant, SageworksRemember dating in high school? You know that guy or girl who you liked but were pretty sure didn't feel the same way about you? It's likely that you doubtless spent...
By Shawn MoriarityYour car's fuel gauge reads empty and you need to find a gas station. Despite BP's new ad campaign or the magazine article you recently read about ExxonMobil's efforts to "go green,"...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.