When a business finds itself having financial difficulties, one solution to resolving them is Chapter 11. A recent bankruptcy filing by an Ohio corporation that owns the Oneida and Anchor Hocking brands illustrates why business bankruptcy under Chapter 11 is referred to as reorganization.
Unlike some other business bankruptcy filings that signal the start of business debt negotiations, the company and its creditors worked out an agreement that includes a complete business reorganization of the company. The creditors agreed to reduce the outstanding debt of the company by almost $250 million. In return, the company agreed that its creditors will own 96 percent of its shares of stock
The business will continue to operate while it is in bankruptcy using money it obtained through loans obtained from its creditors. The deal with creditors should allow the company to come out of bankruptcy without a liquidation of its $237.8 million in assets.
Small businesses should take note and learn from stories such as this one concerning major companies using business bankruptcy as a foundation for business debt negotiations with creditors. Cash flow shortages from seasonal business fluctuations or from slow to pay accounts receivable can leave a small business owner searching for options to keep a business operating.
Business debt negotiations either before or during a Chapter 11 may offer an opportunity for liquidation of debts that are hindering or threatening a company's continued operations. Although there is no guarantee that a small business bankruptcy will have the same successful results as were achieved by the company in this news report, it might provide the vehicle for reaching an agreement with creditors to keep the business running.
Source: WBNS-10TV, "Parent Company of Anchor Hocking Files for Bankruptcy," April 8, 2015