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The Case of Marvel Entertainment

"Not since the big retailing bankruptcies of the early 1990s has so much money been lost on Wall Street. Everyone is screaming murder."

The previos quote was made about the situation of Marvel Entertainment by Linda Sandler, a Wall Street trader.

Marvel Entertainment prospered in the beginning of Ron Perelman's control. He started a restructuring of the company when he initially took control in January of 1989. Things were running smoothly, Perelman was expanding the company with acquisitions as well cleaning up unnecssary operations by restructuring Marve,l as stated earlier. There were multiple offerings of equity and debt. However, in 1996 Marvel's prosperous situation began to turn. The popularity of comic book collecting began to fall when prices began to increase. This caused a fall in sales by 19%. At the same time comic book sales fell, the trading card market began to decline a well. This was due to professional players striking in both areas of baseball and hockey. Marvel had declining revenues, which caused a missed profit estimate in 1995. Even though all of these problems were developing Perelamn kept expanding this own personal empire dragging Marvel further down in debt. The S&P downgraded Marvel in July of 1995, yet Perelman did not take this as a warning sign. The company violated specific bank loans in 1996. The company filed for Chapter 11 on January 28, 1997 and filed their reorganization plan a month later. Problems with disagreements between debtholders or "Vulture Investors" and Perelman began to surface throughout the bankruptcy filing and the reorganizing process of Marvel. The company is now faced with a decision whether to choose Perelman's reorganization plan or the debtholders.