In 2010, many major companies filed prepackaged or prearranged bankruptcies rather than conventional ones. A 2011 AlixPartners survey of bankruptcy professionals predicted that more than half of the large company filings over the coming year would be prepacks, and that prepackaged bankruptcy filings would continue in significant numbers in the ensuing years as well.1 For parties seeking to restructure a company quickly, a prepackaged plan of reorganization can be a powerful and effective tool that provides distinct advantages over both a conventional bankruptcy filing and an out-of-court restructuring. Most notably, a prepack may offer a company the fastest route to restructure through bankruptcy and obtain at least some (though not all) of the benefits potentially offered to companies in a conventional bankruptcy under title 11 of the U.S. Code (the Bankruptcy Code).
Unlike a conventional bankruptcy, in a prepack nearly all negotiation takes place out of the public eye and without the oversight of any bankruptcy court, the Office of the U.S. Trustee or a creditors' committee.
Paul Basta et al., A Practitioner's Guide to Pre-Packaged Bankruptcy: A Primer (American Bankruptcy Institute), p. 1