According to an article in the Star-Telegram, Freedom Communications has filed Chapter 11 bankruptcy and agreed to give their creditors a majority stake in the business in exchange for forgiving a substantial portion of their debt.
The article said:
“The filing by Freedom Communications Holdings Inc. was part of a prepackaged plan approved by a majority of the company’s lenders, which should minimize the haggling that can bog down bankruptcy proceedings… Freedom’s lenders are owed nearly $771 million but have agreed to forgive most of that debt in return for control of the company. The current ownership group, consisting of family members of founder R.C. Hoiles and the investment firms Blackstone Group LP and Providence Equity Partners, would be left with no more than a 2 percent stake.”
Sounds like this bankruptcy filing could be a sweet deal for the creditors–that is IF the company is worth more than the amount of debt the creditors are owed. This prepackaged Chapter 11 bankruptcy is a perfect example of the amount of flexibility offered by Chapter 11 bankruptcy and how filing Chapter 11 bankruptcy can offer a financially struggling company a second chance at success. Even if Freedom Communications does not become as profitable after bankruptcy as the creditors hope, they will still have the assets which can be liquidated and of course they would not be able to pursue the debtors for the discharged debt.