Burr Alert: Pros and Cons of the Pre-Pack Bankruptcy

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Energy Future Holdings Corp. filed a prepackaged ("pre-pack") chapter 11 in April 2014 seeking a complete restructuring and quick-exit from bankruptcy, aiming to be in and out of bankruptcy in under 11 months. In May 2014, the Bankruptcy Court for the District of Delaware confirmed the prepackaged disclosure statement and reorganization plan of Quiznos, and on May 23, 2014, the Bankruptcy Court for the Southern District of New York approved a $570 million loan in the Momentive Performance Materials prepack bankruptcy. These are just a few examples of the fast-paced, evolving world of the pre-pack chapter 11 bankruptcy.

The pre-pack also has disadvantages. The debtor must work closely with certain creditors to reach an agreement as to the treatment of their claims (which could result in those creditors being paid in full). The goal of the pre-pack is to enter and exit bankruptcy in a substantially shortened time period - often between three and twelve months. As with any form of bankruptcy, the pre-pack carries certain pros and cons.

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