Subscription Center  

News

Venable partner Greg Cross was featured prominently in a November 14 National Law Journal story about the rise in prepackaged bankruptcies. Filings of this type of bankruptcy, in which companies and creditors hammer out agreements before heading to bankruptcy court, have tripled so far this year.

Thirty prepackaged bankruptcies out of 164 Chapter 11 filings by public companies have been filed this year as of November 9, according to the BankruptcyData.com.

That compares with 10 prepackaged bankruptcies during the same period in 2008 and three prepackaged bankruptcies in all of 2007.

The rise in prepackaged filings corresponds with the increase in public company bankruptcies. BankruptcyData.com counted 14 Chapter 11 filings by public companies in October, up from eight in September.

According to Cross, prepackaged bankruptcies are climbing because lenders and creditors are now much more sophisticated about bankruptcy.

"People are very cognizant about their rights and what they can achieve; they can negotiate their transactions outside of bankruptcy and use bankruptcy as a tool," he said. "In doing it that way, they save a lot of administrative costs, because bankruptcy can be expensive."