BearingPoint has filed for Chapter 11 as part of a financial restructuring agreed with its senior creditors which will see existing shareholders wiped out.

The tipping point for the technology and consulting services came eight years after it was formed through a spinout from accounting giant KPMG. It seems the move was triggered by the prospect of being required to repay some of its debenture holders as early as April.

BearingPoint said it would continue its operations as normal, and that its non-US operations would not be affected.

“We’ve made significant progress in the last year to improve our underlying business fundamentals," CEO Ed Harbach said. "We’ve delivered increases in gross profit and operating income and substantially lowered our overhead expenses.

"This restructuring process will significantly improve our financial profile and further enhance our ability to compete in the marketplace.”

The firm said key points of the reorg would include the replacement of a $50m senior secured credit facility with a new secured, senior credit facility, consisting of a $272m term loan plus accrued interest and a synthetic letter of credit facility in the amount of up to $130m plus the issuance of new preferred stock. Unsecured debt will be exchanged for different classes of common stock and all existing equity in the Company will be cancelled for no consideration.

In short, anyone still holding its regular stock now has some very fancy kindling.

The writing has been on the wall for some time, despite a client list that features plenty of Federal clients. However, the firm revealed in its Chapter 11 filing that its debt outweighs its assets - something that will have making management and clients increasingly nervous as the credit crunch grinds on. ®

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