Kentucky businesses often need credit to make payroll and grow their business. When things go right, this credit can help the business blossom; when things go badly, it can become a weight around the business’ neck. Fortunately, when an unlucky roll of the dice strikes, Kentucky businesses have a way to lighten that weight – by filing for Chapter 11 bankruptcy. Just ask a company that services oil wells; it may have just shaved off $750 million in debt.
The oil-well servicer found itself $1 billion under water. In response, it filed for Chapter 11 bankruptcy. As part of the process, it negotiated with its creditors a debt-restructuring deal. If approved by the court, the deal allowed the company to slice off $750 million from its debt load.
The company’s filing is called a prepackaged bankruptcy. In this type of bankruptcy, the debt will negotiate a deal with all of its term loan lenders as well as most of its senior bondholders. Once each of those parties agree on a deal, the company files for bankruptcy, providing the bankruptcy court with the deal.
What is the advantage of a prepackaged bankruptcy? It is often faster and less expensive than other forms of bankruptcy because the company and its creditors have already reached an agreement before the matter gets to the court.
But while prepackaged bankruptcies can be an excellent solution for Kentucky businesses, it is not the only option available. To figure out which option might be best for them, Kentucky businesses may benefit from discussing their situation with an experienced business-bankruptcy attorney.
Source: The Wall Street Journal, “Key Energy Files for Chapter 11 After Striking Restructuring Deal,” Sarah Chaney, Oct. 24, 2016
