Comdisco, Inc. filed for Chapter 11 bankruptcy on July 16, 2001, in the Northern District of Illinois, listing $7.5 billion in assets against $6.7 billion in liabilities. The Comdisco bankruptcy became a court-supervised liquidation rather than a traditional reorganization: the company sold its major business units, wound down what remained, and ultimately paid unsecured creditors in full while leaving shareholders with essentially nothing.
Why Comdisco Failed
Comdisco built its business leasing technology equipment, and by early 2000 its shares traded above $50. Then the strategy that had powered its late-1990s growth turned against it. The company had pushed aggressively into technology venture capital and web-hosting services just as valuations peaked, and when the dot-com bubble burst in 2000, that portfolio lost enormous value almost overnight. Demand for equipment leasing softened at the same time as technology spending contracted across the economy.
The stock, above $50 in March 2000, fell to as low as 74 cents by mid-2001. The chief financial officer and two other senior executives departed in early July 2001.1Chicago Tribune. Comdisco CFO, 2 Others Exit Struggling Tech Firm Within days, the company was in bankruptcy court.
The July 2001 Chapter 11 Filing
Comdisco and its affiliated debtors filed voluntary Chapter 11 petitions on July 16, 2001. Most of the $6.7 billion in reported debt was unsecured, which meant bondholders and other creditors without collateral were positioned for a prolonged fight over whatever value could be extracted from the estate.
The court approved $450 million in debtor-in-possession financing to keep operations running. From the start, the strategy was not to rebuild Comdisco as an operating business. It was to sell major business units quickly, before further market deterioration eroded their value, and distribute the proceeds. The going concern would be converted into a liquidating entity.
How the Business Units Were Sold
The largest and most closely watched sale involved Comdisco’s disaster recovery business. Hewlett-Packard initially agreed to buy the unit for about $610 million in cash on July 15, 2001. The bankruptcy court ordered an auction with the HP agreement as the floor bid, and SunGard Data Systems won with a bid of $825 million.2U.S. Department of Justice. Justice Department Files Suit to Block SunGard’s Acquisition of Comdisco Inc.’s Disaster Recovery Assets
The Department of Justice then sued to block SunGard’s acquisition on antitrust grounds, arguing the combined company would dominate the disaster recovery market. The dispute was ultimately resolved, and SunGard completed the purchase for $825 million in cash.
GE Capital acquired two of Comdisco’s leasing businesses, the electronics unit and the laboratory and scientific unit, for approximately $665 million in cash and assumed debt.3The New York Times. GE Capital Buying 2 Comdisco Units for $665 Million These two transactions, together with the SunGard sale and the orderly collection of remaining lease receivables, formed the backbone of what creditors would eventually recover.
The Securitization Fight
One of the hardest legal battles in the case involved Comdisco’s practice of securitizing lease receivables. The company had transferred future lease payments into special purpose entities, which issued bonds to investors backed by the expected cash flows.
The central question was whether those transfers were true sales or secured loans in disguise. If the courts treated them as genuine sales, the equipment and cash flows belonged to the special purpose entities and their bondholders, out of reach of the bankruptcy estate. If the transfers were recharacterized as loans, those assets would come back into the estate and the bondholders would stand in line as secured creditors of Comdisco.
The Unsecured Creditors’ Committee pushed to recharacterize the securitizations as loans, arguing that Comdisco had retained too much control over the equipment and payments for the deals to qualify as true sales. The litigation added significant delay, and its resolution shaped how much each creditor class ultimately received. The plan later addressed these disputes largely through negotiated settlements rather than a single definitive ruling.
The Confirmed Plan and Creditor Recoveries
Comdisco filed its proposed reorganization plan in April 2002, projecting that unsecured creditors would recover about 87 cents on the dollar.4Huron Daily Tribune. Comdisco Files Reorganization Plan The plan contemplated an initial cash distribution of roughly $2 billion, with additional distributions as remaining assets were sold or collected.
The confirmation hearing took place on July 30, 2002, and the plan became effective on August 12, 2002.5U.S. Securities and Exchange Commission. SEC EDGAR Filing – Form 3 for Comdisco Holding Company, Inc. Comdisco emerged not as a revived operating company but as Comdisco Holding Company, Inc., a shell corporation with one job: convert remaining assets to cash and distribute the proceeds.6U.S. Securities and Exchange Commission. Comdisco Announces Fiscal Third Quarter Operating Results Its certificate of incorporation specifically prohibited it from engaging in any business activity inconsistent with that limited purpose.
The actual results exceeded the 87-percent projection by a wide margin. Unsecured creditors were ultimately paid in full, a rare outcome in what was effectively a liquidation. Shareholders received little to nothing.
The Litigation Trust and Executive Loans
In early 1998, before the trouble showed, Comdisco had launched a Shared Investment Plan that encouraged senior employees to buy company stock with borrowed money. Participants purchased 6,320,000 shares at $34.50 per share for an aggregate price of about $109 million, all funded through loans.7U.S. Securities and Exchange Commission. Comdisco, Inc. – Motion of Comdisco Litigation Trustee to Approve Settlement When the stock collapsed, the loans went underwater and the promissory notes became potential assets of the estate.
The reorganization plan assigned 69 of these notes, representing roughly $75 million in aggregate principal, to a Litigation Trust overseen by trustee John W. Costello. Starting in February 2005, the trustee filed individual enforcement lawsuits against the former executives in state and federal courts. Several cases went through appeal, and the Seventh Circuit affirmed summary judgment in favor of the trustee in at least one consolidated action.8FindLaw. Costello v. Grundon The collection effort dragged on for more than a decade, and the trustee moved to approve a global settlement and terminate the trust in 2015.
Final Wind-Down
The small team managing Comdisco Holding Company collected the remaining lease receivables and liquidated what was left of the venture capital portfolio over several years. By mid-2004 the company had substantially completed the monetization of its assets, and Comdisco Holding filed a Certificate of Dissolution with the State of Delaware, formally extinguishing its corporate existence except for the purpose of finishing the wind-down.6U.S. Securities and Exchange Commission. Comdisco Announces Fiscal Third Quarter Operating Results
The remnant assets of the bankruptcy estates were acquired by Oak Point Partners in August 2016. From petition to final disposition, the case ran fifteen years.