Hoosier Park Emerges in Good Shape After Chapter 11 Bankruptcy
The parent company of Hoosier Park Racing and Casino, Centaur LLC, entered Chapter 11 bankruptcy in March 2010. It emerged with around one third of its original debt and with a new owner in October 2011.
Centaur, LLC carried about $906 million in debt before entering Chapter 11. That amount was in large part the $250 million Indiana state licensing fee for slot machines starting in 2007. With the economic downturn, Hoosier Park could not keep up. Chapter 11 bankruptcy allowed the company to restructure its corporate debt, helping it discharge all but about $270 million. Canadian equity management firm Clairvest Group assumed ownership of Hoosier Park upon its Chapter 11 exit.
The Benefits of Chapter 11 Bankruptcy
Unlike Chapter 7 bankruptcy, where a company liquidates its assets to pay its creditors, Chapter 11 bankruptcy allows a company to continue operations while it restructures its debt.
By filing a bankruptcy petition, the U.S. Bankruptcy Court can issue an immediate stay of all debt collections against a company. The goal of a Chapter 11 is to allow the company to negotiate its debt repayment without being hounded by creditors, and allow the business to create and execute a plan for returning to profitability.
Creditors prefer Chapter 11 to Chapter 7 because while they often only receive a partial debt repayment, it is usually more than would have been received under a Chapter 7 liquidation. Most businesses prefer Chapter 11 because it keeps everyone employed and money, hopefully, continues to come in as a business reorganizes and returns to financial health.
When is Chapter 11 Appropriate?
Chapter 11 bankruptcy may be appropriate for a struggling business that believes it can become profitable with some restructuring and reorganization of debt. However, Chapter 11 may not be the best choice for a business with fundamental problems beyond debt.
Nevertheless, bankruptcy is not a decision to be made lightly. If your business is struggling with unmanageable debt, contact an experienced bankruptcy attorney to discuss your situation and your options.
