Jackson Hewitt and Filed a Pre-Packaged Chapter 11

by San Antonio Attorney

Jackson Hewitt Tax Service Inc, the second-largest US tax preparer has finally agreed with its creditors on the company’s restructuring plan, and filed for a pre-packaged bankruptcy under Chapter 11.

The company’s trouble with its creditor began when it was not able to meet the credit agreement’s primary condition, which is to come up with full financing for tax-refund loans.

In a pre-packaged bankruptcy, the company and its creditors have to reach an agreement on a restructuring plan before it is filed. Usually, companies that have pre-packaged filings will be able to leave court protection within one to three months.

The tax preparer company hopes that its reorganization plan will be entirely implemented within 45 to 60 days and expects that there will be no interruptions in its operations.

Jackson Hewitt said in March that it is struggling to manage its growing debt so it is coordinating with its creditors in making a reorganization plan which involves a pre-packaged bankruptcy.

In the court papers filed, five affiliates of the company were included in the Chapter 11 petition, and it has listed $388.6 million of assets and $444.8 million of debt.

Jackson Hewitt said in its filing that it is preparing for the coming tax season and a speedy bankruptcy exit will help the company in executing its expansion plans.

Since tax preparers can no longer offer tax-refund loans, which are funded by different banks but have been clamped down by regulators, they now rely on filing tax returns business. But they also face stiff competition from software companies that assist people in preparing their own taxes.

In the restructuring plan which has been agreed upon, the secured creditors will get their pro rata share of a $100 million term loan and all of the equity in the reorganized company.

The company sees that its new equity will be privately owned, but all its current equity will be terminated.

More Information on Chapter 11 bankruptcy and Jackson Hewitt is located on the San Antonio Attorney site.

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