Earlier this week we discussed how a bankruptcy filing may have been prevented with proper Repurchase Obligation and Distribution Planning. Antioch Company files for bankruptcy protection provides additional details on the bankruptcy filing:

The Antioch Company filed a prepackaged reorganization plan with the U.S. Bankruptcy Court for the Southern District of Ohio and on Friday was granted a first-day motion, which assures that employees' pay is secure, customer needs will be met, suppliers will be paid and business can continue much as it was before, Moran stated in a letter to company vendors last week. And the company expects to complete the transition with its suppliers, lenders and employees by the end of this year, she said.

"It was not an easy decision that we reached, but the whole purpose was to allow us to take the good business and shed the bad balance sheet," Moran said during an interview on Monday.

The article also discusses how the debt that the company took on in 2003, when the company gave its employees a one-time opportunity to resign and sell their shares back to the company, combined with a five-year decline in sales revenue contributed to the filing:

Moran also declined to say specifically how The Antioch Company had accrued its debt. Part of it may have been due to the company's decision to become an S corporation in 2003, which allowed its employees a one-time opportunity to resign and sell their ESOPs back to the company. The number of employees who exercised the option was much higher than the company had expected, Morgan told the News in an interview in August. According to an industry Web site called "Scrapbook Update," The Antioch Company's chapter 11 documents claim that between 2004 and 2007, the company made share repurchases of $190 million for the approximately 800 employees who either left or were laid off.

Over the same five-year period, Creative Memories, the company's most profitable subsidiary, has seen a decline in sales revenue. In 2003, the direct sales company was set to reach $340 million in sales revenues, according to a News article that year. But this year, according to "Scrapbook Update," the company is on track to make $200 million in sales.

The restructuring allows the company to exchange its debt for equity and stock:

The terms of the restructuring allow the company to exchange its debt for equity and stock, Moran said. According to a letter that employee-owners and stock holders received on Monday, the deal allows the company's senior lenders (its banks) the option to participate in 80 percent of the company's preferred stock, while employee-owners can choose to participate in 20 percent of the common stock. While the former ESOP value no longer exists, Moran said that it was difficult to know the value of shares in the new structure because their worth will be based on the performance of the business….To exercise the option of buying into the new stock structure, employees were asked to sign a release form in favor of the company and its lenders, according to the letter to employee-owners, which to Hardman means basically agreeing not to sue them.