Ain’t bankruptcy grand?

Root canal. Job loss. Hail damage. Illness. Bodily injury. Prosecution. Heat exhaustion.

These are some of the things that I’m guessing Dakotafest manager Todd Benz might enjoy, given his recent assertion to The Daily Republic that the Chapter 11 bankruptcy proceedings for Dakotafest owner Cygnus Business Media are "a wonderful thing."

He also said the bankruptcy will have "no punitive effects on anybody," is "nothing but on the plus side," and will put the company "in a position of unbelievable potential."

Do you get the feeling, like I do, that Benz was trying really, really hard to spin a negative into a positive? I don’t doubt that going through bankruptcy and emerging from it successfully could produce some positive results for the company. I do doubt, however, that absolutely everything’s as rosy as Benz is making it out to be.

Take this part of the story, for example:

According to Benz, 24 companies had invested in Cygnus through a private equity firm. As economic conditions tightened, Cygnus’ debt rose to $180 million, causing the companies to exercise their right to exchange debt for stock equity.

Cygnus reached an agreement with 23 out of 24 lenders, but the single holdout meant the company had to implement its plan under Chapter 11 instead of through out-of-court means.

So, basically, it sounds to me like he’s saying the company got into debt way over its head. I’m no financial expert, but that’s what it sounds like. It also sounds like at least one of the company’s 24 lenders is not happy about having to exchange its loan to the company for stock equity. And then there’s the negative public-relations impact to Cygnus and Dakotafest of simply having their names associated with the word "bankruptcy," which Benz admitted carries a negative connotation.

Maybe some of you out there in the blogosphere know some things about Chapter 11 bankruptcy, and you can tell us if it’s really as fabulous as Benz said it is. You can read all of Cygnus’ bankruptcy paperwork by clicking here.