Parsippany-based Jackson Hewitt Tax Service Inc. announced Tuesday that a U.S. Bankruptcy Court in Delaware has approved its reorganization plan following the company’s Chapter 11 bankruptcy filing on May 24.
Under the plan, Jackson Hewitt will emerge from bankruptcy as a private company. Its majority owner will be Bayside Capital, an affiliate of Miami-based HIG Capital, the largest holder of secured Jackson Hewitt debt prior to the restructuring.
Two-thirds of the company’s term debt was forgiven in exchange for post-emergence common equity. Pre-emergence common stock will be extinguished, the company said.
Edward B. Deutsch, managing partner at the Morristown law firm of McElroy, Deutsch, Mulvaney & Carpenter LLP, said the restructuring plan is similar to other recent corporate bankruptcies.
“This reorganization is typical of the recent trend in corporate restructurings, for large pre-petition stakeholders of a troubled company exchanging their debt positions for controlling interests in the restructured enterprise,” Deutsch said.
David G. Weselcouch, vice president of treasury and investor relations at Jackson Hewitt, said he expects the closing conditions attached to the deal to be completed within the next several days. Asked whether the company’s footprint would change in the wake of the deal, he said the company won’t finalize its number of locations for the upcoming tax season until the fall, since he said the company is always looking to “optimize” its footprint by adding new locations or closing locations in sub-standard real estate.
Weselcouch said the timing of the restructuring plan worked in the company’s favor, and the reorganization won’t affect the company’s preparations for the 2012 tax season.
In a statement announcing the court’s confirmation of the plan, Jackson Hewitt President and CEO Philip H. Sanford sounded an optimistic note, saying the company is poised to emerge from bankruptcy “highly energized and financially healthy.”
Sanford noted the company saw a 3 percent increase in the number of tax returns it prepared in 2011. The company said it was the first growth in tax return preparation in five years. The company also saw increased revenues last year.
One reason for that growth has been the firm’s relationship with Walmart. Jackson Hewitt has tax prep kiosks in more than 2,000 Walmart stores, and Sanford said he hopes to further expand the relationship.
“Our clients, franchisees, employees and business partners can be confident in our future,” he said. “We move forward with a strong balance sheet, a fully funded business plan, a seasoned and stable management team, and the ability to make investments that will better position us to compete and win in the marketplace.”
