Pre-Packs Continue Their Resurgence
Recently, pre-packaged and pre-arranged bankruptcies have jumped in popularity, helped along by more stringent bankruptcy laws and concerned lenders.
May 12, 2008
As the credit-market dislocation chugs on, one corner of the bankruptcy world is getting more attention: pre-packs.
As Reuters reports, gone are the days when troubled companies could spend years in bankruptcy court curing what ails them. Recently, pre-packaged and pre-arranged bankruptcies have jumped in popularity, helped along by more stringent bankruptcy laws and concerned lenders. (IDD wrote a story on the resurgence of pre-packs back in March. To read that story, click here.)
"The bias is going to be towards getting in and out of bankruptcy quickly," said Jerry Mozian, a director of restructuring at consultancy Tatum LLC, as quoted by Reuters.
While pre-packaged bankruptcies, in which creditors vote on a bankruptcy plan before it is filed with the court, have been around since the 1980s, the current credit market conditions have made them a much more common form of filing.
While there were only four pre-packaged bankruptcies initiated in all of 2007, this year there were four pre-packaged bankruptcies filed in February alone, according to research firm Bankruptcydata.com. Several more pre-packaged bankruptcies have been filed since then, as the tightening of the credit markets has changed the game for a US company seeking bankruptcy protection.
To read the full story from Reuters, click here.
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