A Novel Approach To Vote Solicitation On Prepackaged Plans

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Dow Jones Daily Bankruptcy Review

Section 1125(g) of the Bankruptcy Code provides a novel alternative for debtors seeking to file for chapter 11 protection to restructure their balance sheets: launching a prepackaged plan solicitation, immediately filing a protective chapter 11 case and having the voting period occur during the bankruptcy proceedings. Otherwise, filing a traditional "free-fall" chapter 11 petition initiates a process that could last months or years, and, while a prepackaged bankruptcy is shorter, it requires prepetition solicitation of votes on a plan of reorganization. Prepetition solicitation may afford hostile counterparties time to exercise remedies or take other adverse action in advance of the filing. However, section 1125(g) may allow a debtor to launch a prepackaged bankruptcy without tipping its hand to hostile parties in advance of the bankruptcy filing and its automatic stay

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