The Creation of FirstCity Financial Corporation: A Clinical Study of the Bankruptcy Process

International Journal of Finance Education, Vol. 1, No. 1, 2005

Posted: 6 Feb 2006  

Ramesh K. S. Rao

University of Texas at Austin - Department of Finance

Susan V. White

University of Maryland - Department of Finance

Abstract

This paper examines the bankruptcy of FirstCity Bancorporation of Texas and its subsequent emergence, through a merger, as FirstCityFinancial Corporation (FCFC). It illustrates several interrelated issues: a) how informational asymmetries and disagreements among the various claimants were efficiently resolved through the use of a Court's Expert, b) why a merger was critical for the success of the reorganization plan, c) the process by which the claims were valued, and d) the steps taken by the Court to ensure that the "best interests test" was satisfied under the reorganization plan.

Keywords: Bankruptcy, confirmation, First City, best interests test, reorganization

JEL Classification: G33, G34

Suggested Citation

Rao, Ramesh K. S. and White, Susan V., The Creation of FirstCity Financial Corporation: A Clinical Study of the Bankruptcy Process. International Journal of Finance Education, Vol. 1, No. 1, 2005. Available at SSRN: https://ssrn.com/abstract=880762

Ramesh K. S. Rao (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-475-8756 (Phone)
512-471-5073 (Fax)

Susan V. White

University of Maryland - Department of Finance ( email )

Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States

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