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Bankruptcy Keyed to Levitan, 3rd Ed.
In re Lionel Corporation
Citation:
722 F.2d 1063 (1983)Facts
Lionel Corporation, a toy train manufacturer with 10,000 investors holding 7.1 million shares, filed for Chapter 11 reorganization in February 1982 after incurring $22.5 million in losses over two years. Lionel’s most valuable asset was its 82% ownership of Dale Electronics, a profitable manufacturer of electronic components representing approximately 34% of Lionel’s consolidated assets. Unlike Lionel’s struggling toy operations, Dale was profitable, generating $18.8 million in operating profit during the same period Lionel lost $22.5 million. In June 1983, Lionel sought court approval to sell its Dale stock, initially to Acme-Cleveland for $43 million, but ultimately to Peabody International for $50 million after competitive bidding. The Creditors’ Committee insisted on the sale to provide cash for creditor repayment, while the Equity Committee opposed it as premature and unnecessary since Dale was not a deteriorating asset. The bankruptcy court approved the sale based primarily on the Creditors’ Committee’s insistence and concern that failure to approve would delay reorganization.
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