Bouncing Back: 5 Big Companies That Recovered From Bankruptcy

American Airlines

American Airlines is far from the only major passenger airline to emerge from bankruptcy – Delta, United and Air Canada have all reclaimed its losses. Yet, American Airlines’ recovery story is one of the most impressive.

The company and its parent – AMR Corp. – filed for bankruptcy in November 2011. By early 2014, AMR and US Airways Group had completed a merger to form the world’s largest airline: American Airlines Group.

Despite the new company’s hefty bankruptcy costs and court settlements, 2014 was American Airlines’ first profitable year since 2007. The airline even managed to turn a small profit in 2020 – a year wracked by COVID-19.

Ashley Stewart

Plus-size women’s fashion brand Ashley Stewart got about as close to the end of the line as a business can get. In March 2014, the company filed for bankruptcy for the second time within three years. The future was looking grim: Local stores were shutting down left and right, and investors weren’t eager to be associated with what appeared to be another failing retailer. 

Consequently, executive chairman and CEO James Rhee had a vision to reinvent Ashley Stewart as an e-commerce business and social media-driven company. Rhee felt a sense of responsibility to the brand’s core customers – Black women – and wanted to do right by the underserved demographic. [Learn how to use demographics in marketing for your own business.]

The brand’s saving grace came in the form of a buyout by private equity firm Clearlake Capital, which purchased Ashley Stewart just one month after the bankruptcy filing. 

The company rebuilt under Rhee’s leadership, developing an optimized mobile website, building up its YouTube channel Ashley TV  and using creative marketing techniques like celebrity endorsements. Ashley Stewart posted earnings of $20 million in 2016 and was predicted to eclipse $150 million before the coronavirus pandemic hit. When the pandemic hit in 2020, like many businesses Ashley Stewart faced even more challenges. The company shuttered its 88 stores, but kept most of its team employed as community outreach workers. 

Today, most of Ashley Stewart’s retail locations are reopened, and the company’s e-commerce business is thriving. 

When we asked him how the company could pull through its financial woes, Rhee said that it took “vision, mission and resolve, and the ability and willingness to embrace full transparency in the hopes of unifying and mobilizing an army of believers and doers.” 

Betsey Johnson

Though her fashion company is thriving today, designer Betsey Johnson’s business once faced hard times. Profits fell drastically from their peak of $150 million in the mid-2000s. In April 2012, Betsey Johnson LLC filed for Chapter 11 bankruptcy, even after Steve Madden purchased the company’s outstanding debts and licensing agreements in 2010. This resulted in 350 layoffs and the closing of nearly all Betsey Johnson retail stores. 

But that didn’t stop Johnson: By the end of 2012, she had already started to rebuild her company by introducing a new, lower-priced line of dresses that still embodied her classic, whimsical style. Johnson has credited the company’s pivot to success by focusing on e-commerce.

Today, you can find Betsey Johnson designer clothes in retail stores like Macy’s. Additionally, Betsey Johnson’s e-commerce site is thriving with offerings such as women’s clothes, home decor, beauty items and accessories. 

General Motors

The economic recession of 2008 brought many big-name companies – including General Motors – to the brink of bankruptcy. 

Founded in 1908, the once-powerful auto manufacturer ended its 100th anniversary year with a debt of more than $30 billion. In June 2009 the company filed for Chapter 11 bankruptcy as a result of the debt. With the help of government funding and a radical restructuring plan by Jay Alix, bankruptcy expert at AlixPartners, GM made an initial public offering in 2010. 

The company was profitable again by the end of that year and is still thriving. GM’s 2021 earnings showed a net income of $10 billion. [Learn the difference between net income and gross income.]

Kodak

For more than 100 years, the Eastman Kodak Co. was a giant in the photographic film industry. But like many older companies, Kodak became a victim of changing times and technologies. 

As digital photography entered the mainstream in the late 1990s and early 2000s, the company’s film sales floundered. Kodak struggled to keep up with the transition to digital and ultimately filed for Chapter 11 bankruptcy in January 2012. 

After nearly two years of corporate reorganization, a new Kodak emerged in September 2013, rebranding itself as a technology company focused on imaging. Though the company’s stock is trading considerably lower than its 2014 post-bankruptcy high, Kodak seems to have weathered the worst of its financial woes. The company reported a 2021 GAAP net income of $24 million.

Common threads to bankruptcy recovery

These companies exemplify you can proceed and even grow after hitting rock bottom. Every bankruptcy case is unique, but here are some of the most common ways that companies thrive following bankruptcy protection:

• Renegotiate debts. In bankruptcy, you may be able to pay off specific debts at deep discounts, renegotiate loan terms or even convert creditors to equity stockholders who have a stake in your success. [Related article: Debt vs. Equity Financing]
• Reorganize the company. Sometimes layoffs may be necessary to improve your company’s financial position. At the very least, reexamine your company’s org chart to streamline divisions and develop a flatter organizational structure.
• Shed excess overhead. Companies often have to do more than lay off employees. Consider closing some facilities or otherwise scale back operations to reduce operating costs.
• Refocus efforts. One big opportunity in bankruptcy is to refocus your company’s operations on its most significant profit centers, thus ditching areas that operate at a loss or on thinner margins.
• Seek strategic partnerships. A strategic partner may be an investor, a particular vendor or client you can deepen relationships with to grow together. [Follow these tips for pitching your business to investors.] 

A final word on rebuilding

Bankruptcy doesn’t have to be the end of your business. After all, it’s called bankruptcy protection for a reason: Bankruptcy gives you a chance to step back and work on improving your business, renegotiate deals with creditors, and lower operating costs for a chance at a successful future.

Nicole Fallon contributed to the writing and reporting in this article.