Texas residents who are running a business often run into financial issues that make it necessary to consider a Chapter 11 bankruptcy. This is not necessarily an attempt to end the business, but to have a debt reorganization to come back stronger than before. One method that is used for filing for Chapter 11 bankruptcy is a “prepackaged” plan. Understanding the various aspects and benefits of a Chapter 11 business bankruptcy is imperative before deciding on the right alternative.
A company that provides oilfield services has moved forward with a prepackaged Chapter 11 bankruptcy, in which it will trade $280 million in its debt for equity. This is not unusual in today’s world as companies specializing in this arena have had financial problems due to the reduction in drilling. This particular company stated that the energy slump lowered the demand for its services and, as a result, the company could not pay a portion of its debt.
The restructuring plan was agreed to by 87 percent of those who hold unsecured debt in the company. The company operates in Texas, Louisiana and Pennsylvania with its well-servicing rigs. In addition, it moves and dispatches fluids that are utilized when drilling takes place. There will be a cancellation of current equity in the company.
Any business can benefit from filing for Chapter 11 bankruptcy if the situation calls for it. It can be a family business, an LLC, a closely held business and more. The key for a business owner to decide on the right course of action is having the right information.
Source: reuters.com, “Forbes Energy eyes quick emergency from prepackaged Chapter 11,” Tracy Rucinski, Jan. 23, 2017