Bankruptcy Stamp

According to an article in the Business Journal, True Temper Sports Inc. has filed for Chapter 11 bankruptcy protection.  The company is filing a pre-packaged bankruptcy petition with the approval of its secured lenders, bondholders and shareholders.

The article said:

“The filing is considered to be “a mechanism to implement the agreed upon balance sheet restructuring, and will not impact the fundamental business of True Temper or its day-to-day operations,” according to a company statement.”

The True Temper Sports bankruptcy is designed to reduce the company’s debt from $275 million to less than $40 million. True Temper Sports hopes to emerge from bankruptcy in the next 60 days.  That sounds like great deal, just two months in bankruptcy and then emerge from bankruptcy with only a fraction of the debt it had before.  What would you do if you could have just a fraction of the debt you have today, or no debt in just a couple of months? Save for retirement, get health insurance or buy a home?  Many debtors feel guilty about dumping debt during bankruptcy; but shrewd businesses understand that bankruptcy is a tool like any other, designed to help them succeed in the long-term. True Temper Sports took an honest assessment of their financial position and determined that is was time to file bankruptcy if they in fact wanted to survive, not only that; but their creditors agreed. Why would any creditor agree to a bankruptcy filing?  They may agree to bankruptcy because priority creditors can get paid first if non-priority debts are discharged or reduced during a bankruptcy.  For example, student loan lenders may be glad to have a debtor file bankruptcy if it frees up more money for them.  Sometimes bankruptcy can benefit creditors. That’s why some creditors force business/debtors into a bankruptcy filing.