It's Chapter 11 bankruptcy protection for Bearingpoint | AccountingWEB

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, 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."

Wait, there's more!
There's always more at AccountingWEB. We're an active community of financial professionals and journalists who strive to bring you valuable content every day. If you'd like, let us know your interests and we'll send you a few articles every week either in taxation, practice excellence, or just our most popular stories from that week. It's free to sign up and to be a part of our community.
Premium content is currently locked

Editor's Choice

As part of our continued effort to provide valuable resources and insight to our subscribers, we're conducting this brief survey to learn more about your personal experiences in the accounting profession. We will be giving away five $50 Amazon gift cards, and a $250 Amazon gift card to one lucky participant.
This is strictly for internal use and data will not be sold
or shared with any third parties.