Prepackaged Chapter 11
A Prepackaged Chapter 11 is a restructuring in which the debtor solicits and typically obtains plan votes before filing bankruptcy, then seeks to use those prepetition votes to confirm a Chapter 11 plan on an accelerated postpetition timeline.
How it works
Section 1126(b) permits qualifying prepetition acceptances and rejections to count if the solicitation complied with applicable nonbankruptcy disclosure law or, where none applies, followed disclosure of adequate information. Section 1125(g) separately permits qualifying prepetition solicitation. Bankruptcy courts often use local procedures or guidelines to schedule accelerated confirmation proceedings for true prepackaged cases.
Prepetition votes can survive the filing
Section 1126(b) recognizes acceptances and rejections obtained before commencement when the statutory disclosure conditions are satisfied.
Disclosure still matters
A prepack is not a way to avoid informed voting. The court must determine whether the prepetition solicitation satisfies applicable standards before relying on the votes.
The postpetition timeline can be much shorter
Because voting has already occurred, a debtor can seek accelerated confirmation, subject to notice, objection and court-review requirements.
Prepackaged and prenegotiated are different
A restructuring support agreement can lock in stakeholder support without constituting completed formal plan solicitation.
Worked example: filing with votes already counted
A debtor receives accepting votes from 90% in amount of a bond class before filing. On the Petition Date it files the plan and voting certification. The court still reviews disclosure, voting validity and Section 1129 requirements.
Why prepacks can preserve value
A shorter court process can reduce professional fees, business disruption and uncertainty. The trade-off is that major restructuring terms must be negotiated and disclosed before bankruptcy protection begins.
Common mistakes
Calling every fast Chapter 11 a prepack; assuming a restructuring support agreement alone creates a prepack; treating prepetition votes as automatically valid; and assuming accelerated timing eliminates ordinary confirmation requirements.
Example
A company negotiates a plan with bondholders, distributes solicitation materials and receives sufficient accepting votes before filing Chapter 11. It files the petition, plan, solicitation materials and voting results together and seeks a rapid Confirmation Hearing rather than beginning solicitation from scratch.
Example
A company negotiates a plan with bondholders, distributes solicitation materials and receives sufficient accepting votes before filing Chapter 11. It files the petition, plan, solicitation materials and voting results together and seeks a rapid Confirmation Hearing rather than beginning solicitation from scratch.
Professional note
Do not confuse a prepackaged case with a prenegotiated case. A prenegotiated debtor can enter bankruptcy with an agreed restructuring framework or support agreement but without having completed formal plan solicitation and voting prepetition.
Related terms
- Restructuring Support Agreement (RSA)
A Restructuring Support Agreement, or RSA, is a contract among a financially distressed company and supporting creditors or other stakeholders that sets the agreed framework for a restructuring and requires the parties to support specified transactions, subject to the agreement's conditions and termination rights.
- Class Acceptance
Class Acceptance is the Chapter 11 voting determination under Section 1126 that establishes whether a class of claims or interests has accepted a proposed plan based on the votes actually cast by eligible holders.
- Confirmation Hearing
A Confirmation Hearing is the Chapter 11 court hearing required by Section 1128 at which the court determines whether a proposed plan satisfies the applicable confirmation requirements and considers objections from parties in interest.
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