Jackson Hewitt Expects Court Approval on Restructuring Plan

by San Antonio Attorney

Jackson Hewitt Tax Service Inc, the second-biggest US tax preparer to creditors, is expecting a fast approval of the company’s restructuring plan under Chapter 11, according to its attorney last Wednesday.

A bank loan due on October prompted the company to file for bankruptcy on Tuesday, after the tax season. It hopes to complete the restructuring in less than 60 days.

The problems with its creditors began when the company was unable to meet a basic condition of its agreement with the creditors which is to provide tax-refund loans funding. The funds come from various banks but bank regulators have clamped down tax-refund loans saying that they are not safe.

Mark McDermott, an attorney from firm that represents the company, said that Jackson Hewitt’s bankruptcy plan has been approved by the 10 holders of its secured loan which amounts to $357 million.

The overall debt of the company is more than its $225 million total value.

Mark McDermott added that in the case of Jackson Hewitt, there will be nothing left to pay the unsecured creditors.

The company will continue to provide its main service in tax preparation and it is now anticipating for the next tax season in January.

The company plans to close 88 of its stores and offices. About 2,000 of its 5,900 stores are in Wal-Mart Stores. Out of its 4,600 franchises, about 700 of them are owned by franchisees.

He also added that, under the restructuring plan, a new equity will be given to the creditors, who will also have another $100 million term loan and another $115 million revolving credit agreement.

A number of “first day” motions have been approved by the court to make it possible for Jackson Hewitt to keep on operating as it works its way out of Chapter 11.

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