ATLANTA (December 06, 2002) — In late October, Atlanta-based law firm Smith, Gambrell & Russell completed the city’s first “pre-packaged” bankruptcy case. This new bankruptcy process, developed by committees of the Bankruptcy Section of the Atlanta and State bars, allowed client Knology Broadband to continue operations while meeting its debt payments.
Pre-packaged bankruptcy is beneficial to companies that are capable of continuing operations while restructuring debt. In typical Chapter 11 bankruptcy filings, companies submit restructuring plans to both the court and claimholders for approval after filing an initial petition. However, in pre-packaged bankruptcies, claimholders’ approval is gained prior to filing a petition, also called “mandatory discovery,” reducing the strain on the courts. As a result, this method causes the least disruption to the company’s contractors and clients, as it allows the company to focus on its daily operations once initial claimholder approval is garnered.
In addition, pre-packaged bankruptcy filing gives the company breathing room to restructure its debt and continue operations instead of liquidating. Another advantage is that shareholders are offered a pre-approved exchange deal, which often is of greater value than what they might receive should the court liquidate the company under Chapter 7.
Ron Barab, a partner in the bankruptcy section of Smith, Gambrell & Russell sees the pre-packaged bankruptcy as “an advantage because it allows the company, its investors and creditors the time to make informed decisions without the pressure of court-forced liquidation weighing on their minds. In addition, electronic case filing is encouraged in pre-packaged bankruptcy, as it frees up the courts because the volume of paperwork is greatly decreased.”