prepackaged bankruptcy

(redirected from Prepackaged Bankruptcies)

Prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan of reorganization and then file it along with the bankruptcy petition.

Prepackaged Bankruptcy

A situation whereby a company and its creditors agree on the terms of bankruptcy before it is filed with bankruptcy court. That is, the company and its creditors agree how and how much each creditor will be repaid and the terms of repayment. All parties, including shareholders if applicable, must agree to the prepackaged bankruptcy before it takes effect. A prepackaged bankruptcy makes it easier and less expensive for all parties when a company files Chapter 11 and reorganizes.

prepackaged bankruptcy

A Chapter 11 bankruptcy settlement in which the reorganization and main provisions have been agreed to by creditors and stockholders in advance of the filing.
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From 2005 to 2007, the number of publicly traded companies that filed prepackaged bankruptcies averaged about three a year, according to data provided to NACM by Bankruptcydata.
The reduced precision may be due to fewer observations of prepackaged bankruptcies.
There is a burgeoning effort by asbestos plaintiffs' counsel to induce companies to create prepackaged bankruptcies, often extracting extra fees for facilitating a settlement.
Prepackaged bankruptcies are a compromise between Chapter 11 and out-of-court reorganizations of debts in which an agreement is usually very difficult to reach (Anderson, 1990).
Among them are the SOP's applicability to entities emerging from chapter 11 that fail to meet fresh-start reporting criteria as well as to prepackaged bankruptcies.
9, 1991, at 1 (reporting that "[i]nvestment bankers and lawyers are closely eyeing a legal technique dubbed an 'instant bankruptcy' that would allow a company to file for and emerge from Chapter 11 simultaneously"); Cauri Coyal, Hybrids Emerging as New Wrinkle on Prepackaged Bankruptcies, BONDWEEK, May 13, 1991, at 1 (reporting predictions that "[f]inancially troubled companies that cannot file prepackaged bankruptcies will increasingly turn to hybrid or partial prepacks as a way of speeding up and cutting the costs of reorganizing under Chapter 11").
2006 saw a total of ten prepackaged bankruptcies initiated; and 2005, 2004 and 2003 figures were 7, 14 and 21, respectively.
Tom Sacher: Some customers are getting more sophisticated with prepackaged bankruptcies, and my sense is that they are coming into bankruptcy court earlier.
This paper examines the size and determinants of direct costs in a sample of 157 traditional Chapter 11s, prepackaged bankruptcies, and exchange offers over the period 1986 to 1993.
In general, prepackaged bankruptcies file a Plan of Reorganization and related Disclosure Statement along with a Chapter 11 petition.
The current trend suggests at least three alternatives for debt restructurings: Chapter 11 reorganizations, prepackaged bankruptcies, and workouts.
While prepackaged bankruptcies have been around since the 1978 overhaul of the Federal Bankruptcy Code, it wasn't until 1986 that a major company used such a workout plan.