Bankruptcy
On November 15, 2004, Lionel, LLC filed for Chapter 11 bankruptcy protection, citing the US$40 million-plus judgment in the MTH lawsuit as the primary factor. In the filing, it listed US$55 million in debt and US$42 million in assets. The largest secured creditor was PNC Financial Services Corp., owed US$31 million. The MTH judgment was not included in the US$55 million figure. On July 26, 2006, Lionel's bankruptcy judge ordered that Lionel submit a plan for emerging from bankruptcy within 75 days of the appeals court's verdict on the MTH lawsuit. On December 14, 2006, a federal appeals court determined that the company was entitled to a new trial, and that their reorganized plan should be filed by March 1, 2007.
Subsequently, on March 27, 2008 Judge Burton R. Lifland, of the U.S. Bankruptcy Court in New York, approved Lionel LLC's Chapter 11 reorganization plan, clearing the way for the company to exit bankruptcy. According to Lionel Chief Executive Jerry Calabrese, the plan called for the company to pay all its creditors in full with interest, whilst the company itself would also obtain up to US$40 million in loans to fund its exit from Chapter 11, pay off its creditors and fund its working capital needs in the future.
In regard to MTH lawsuit, recent filings revealed Lionel agreed to pay MTH US$12 million in cash to settle the lawsuit and a separate suit involving patented smoke-puffing technology. Calabrese and MTH lawyer Alec Ostrow declined to comment on the settlement.
Lionel's Chapter 11 plan also called for private-equity firm Guggenheim Partners to contribute US$37.1 million to the reorganized Lionel company, which consequently would now own 48.6 percent of the new Lionel. Similarly, the plan also called for the estate of the late Martin Davis (former chairman of Gulf+Western Industries/Paramount Communications Inc.) to provide US$21.9 million to Lionel, and the Davis estate would now have a 28.6 percent share in the reorganized company. Guggenheim Partners's and the Davis estate's funding totaled US$59 million for the reorganization plan; they would also loan Lionel an additional US$10 million in second-lien debt. As a result, Calabrese expected the company to be out of bankruptcy "within a week".
Following the reorganization plan, Neil Young was no longer a minority shareholder in the Lionel company; however, Calabrese insisted that the company wanted Young to remain involved, claiming that Neil would have an "ongoing role in the company", but that this role would be "up to ". The pair had organized a meeting on March 28, 2008. Young remains an active consultant in the company's LEGACY and other high-end products as of 2012.
As of May 1, 2008 Lionel was fully out of bankruptcy.
While the company's website identifies it as Lionel, LLC, its press releases refer to it as Lionel Electric Trains, headquartered in New York, NY.
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