Strange Bankruptcies of 2011

Bailouts and copouts aren’t just for Wall Street. Nations, celebrities, cities, the United States Post Office, major sports franchises, and perhaps some of your neighbors teetered on the brink in 2011. Leagues of nations wagered their own economic stability and frantically pooled money to keep Greece from defaulting as it wrote down half its debts.

Bankruptcy was everywhere and on every scale, and it meant something different to everyone. For pizza chain Sbarro, filing for bankruptcy was a second chance. For the capital of Pennsylvania, it was the only option. For rapper Young Buck, it was an embarrassment to his mentor, 50 Cent. For the Los Angeles Dodgers, it was an embarrassment to major league sports. And for Jon Corzine’s MF Global, it was an embarrassment to pretty much everyone.

Red (Bankrupt) Carpet
In 2011, David Darnell Brown, better known as Young Buck, joined a club that over the years has signed the likes of musicians Willie Nelson, Marvin Gaye, Tom Petty, and Meatloaf: the bankruptcy club. It’s not limited to musical talent, though — Andre Rochat, the self-described “original celebrity chef,” also cooked up a bankruptcy filing in 2011.

A few popular haunts also made the list. Oregon’s View Point Inn and Restaurant, featured in the “Twilight” movie, and Beso, the Las Vegas nightclub and restaurant co-owned by Eva Longoria, entered into a bankruptcy restructuring as well.

Business as Usual, or Not so Much
Good news: For the 12-month period ending September 30, 2011, business bankruptcy filings were down 14% from the same period a year earlier. Those were 49,895 cases in which the debtor was a corporation or partnership, or the debt was predominantly related to the operation of a business.

Still, some businesses had to pull back or close shop. Among the most high profile was solar panel maker Solyndra. The one-time darling of government officials and Goldman Sachs made eyebrow-raising headlines in its sharp decline. It became a subject of  a congressional investigation, drew the ire of venture capitalists and taxpayers alike, and ultimately filed for bankruptcy protection in September 2011.

The subject of much attention (but no congressional investigations), all the elastic in the infamous Hooters‘ outfits wasn’t enough to hold the business together. The company that owns Hooters, 155 Tropicana, went for broke in 2011, blaming the drop in Las Vegas traffic.

Other high-profile filings included Sbarro, Borders, and American Airlines. And let’s not forget that MF Global, the firm that former New Jersey Governor Jon Corzine sought to turn into a new-age Goldman Sachs, became the eighth-largest U.S. corporate bankruptcy. It diverted investor money to cover bad and far-too-risky bets on Europe, leaving regulators with the puzzle of the missing millions in the wake of its abrupt bankruptcy filing.

Read about Borders’ closure and other momentous endings

Destination Broke: Bankrupt Cities and More
Municipalities, struggling to clean up their balance sheets, also brushed with bankruptcy rumors and, more rarely, filings.

Some cities made headlines for trying to see their way around bankruptcy. In Highland Park, Michigan, the city turned out the lights. It agreed to a settlement with DTE Energy that included the removal of light bulbs in 1,400 light poles.  The city avoided paying $4 million in unpaid bills, going back several years, and is saving an estimated $50,000 per month. (Looking for a brighter future, Highland Park replaced 200 of the remaining bulbs with higher-efficiency models.)

Other cities, desperate for bankruptcy, couldn’t get it. Harrisburg, Pennsylvania filed for bankruptcy on October 11, facing debt five times greater than its general-fund budget, after funneling cash into overhauling and expanding an incinerator that didn’t generate enough revenue to make payments on time. But not so fast — the municipal bankruptcy filing was dismissed by a bankruptcy judge on November 23 at the request of the state and the city’s mayor.

Other cities, also drained, urged bankruptcy. In Alabama, the Birmingham City Council unanimously voted to pass a resolution appealing to the Jefferson County Commission to declare bankruptcy. The council voted to flush a proposed public sewer authority and other proposed concessions to bankers. Instead, the council asked the U.S. Justice Department to take legal action against JP Morgan Chase, which allegedly played a lead role in shady dealings that spawned sewer-warrant fraud and, ultimately, the financial demise of the area.

The bottom line: A lot of people lost sight of the bottom line.

Elizabeth Trotta is a news and investing editor for Yahoo! Finance. Before joining Yahoo! in October 2010, she wrote for SmartMoney, TheStreet.com and Investment Dealers’ Digest.

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