Sungard files Chapter 11 bankruptcy for second time in three years

By Sarah Lizee

Olympia, Wash., April 11 – Sungard AS and 11 affiliated debtors filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas, according to a press release.

The company also started proceedings for its Canadian subsidiary under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice in Toronto.

In addition, another Sungard subsidiary initiated an administration proceeding for its business in the United Kingdom on March 25 to preserve value while working toward a longer-term solution.

“Like many companies, our business has been affected by challenges in our capital structure, driven by the global Covid-19 pandemic and other macroeconomic trends including delayed customer spending decisions, insourcing and reductions in IT spending, energy inflation, and reduction in demand for certain services,” Michael K. Robinson, Sungard’s chief executive officer and president, said in the release.

Sungard previously completed a pre-packaged Chapter 11 filing in May 2019. The 2019 process addressed the company’s long-term debt issues by eliminating more than $800 million in debt and infused $100 million of new liquidity by the company’s creditors.

“While it was successful in reducing the company’s long-term debt, the process did not solve for challenges inherent to the company’s operating structure, mainly uneconomical leases and underutilized space,” the company said.

The company said it expects to complete the process by mid to late summer.

RSA

The company has entered into a restructuring support agreement with the support of lenders of 80% of its first- and second-lien term loans.

The RSA contemplates either a sale of all or some subsets of the debtors’ assets or the equitization of the debtors’ prepetition funded debt through a Chapter 11 plan.

The consenting lenders established a reserve price for each group of the debtors’ assets and have also set a cap on any credit bid they submit.

DIP financing

To support its ordinary course operations during the process, the company secured access to $7 million of bridge financing with PNC Bank, NA in advance of the Chapter 11 cases.

In addition, the company is seeking court approval of debtor-in-possession financing totaling $335.9 million, comprising a $50 million senior secured revolving credit facility and a $285.9 million senior secured multi-draw term loan facility, consisting of up to $95.3 million in new money loans and up to $190.6 million in rolled-up prepetition debt.

The DIP term loans will be structured in three parts, with new money classified as tranche A loans, and rolled-up debt classified as tranche B loans for first-lien debt and tranche C loans for second-lien debt.

PNC is the DIP revolver lender and administrative agent.

The DIP term loan agent is Acquiom Agency Services LLC. The term loan DIP lenders are Alcof II NUBT, LP by Arbour Lane Fund II GP, LLC, Alcof III NUBT, LP by Arbour Lane Fund III GP, LLC, Blackstone Alternative Credit Advisors, LP, Carlyle Investment Management, LLC, FS Credit Opportunities Corp., by FS Global Advisor, LLC, and FS KKR Capital Corp., by FS/KKR Advisor, LLC.

Interest is Libor plus 950 basis points on the tranche A DIP term loans, with the option to pay up to 8.5% of the interest in kind; Libor plus 750 bps on the tranche B DIP term loans, with the option to pay up to 6.5% of the interest in kind; and Libor plus 675 bps on the tranche C DIP term loans, with the option to pay up to 5.75% of the interest in kind.

The original issue discount on the tranche A term loans is 3%.

The company is seeking interim access to $41.15 million of the DIP facilities.

Some of the proceeds of the DIP term loan will be used to repay the bridge financing, following an interim order.

Sungard is also requesting access to the cash collateral of its prepetition secured lenders.

Based on the additional financing received, Sungard intends to meet its financial obligations, including paying suppliers in the normal course of business for goods and services delivered going forward.

The company also has filed customary motions to honor its commitments to employees and customers. As such, Sungard will continue to operate in the normal course of business.

Debt details

The company reported $500 million to $1 billion in both assets and liabilities.

Its largest unsecured creditors are Ensono LP, based in Downers Grove, Ill., with a $3.81 million trade claim, 401 North Broad Lessee, LLC, based in Philadelphia, with a $2.4 million landlord claim, Micro Focus LLC, based in Santa Clara, Calif., with a $1.52 million trade claim, Avant Communications, based in Chicago, with a $1.37 million marketing partner claim, Bridgeport Technologies, Inc., based in Downers Grove, Ill., with a $1.07 million marketing partner claim, and PSE&G Co., based in Secaucus, N.J., with a $1.04 million utility provider claim.

Other details

Sungard's operations in Ireland, France, India, Belgium, Luxembourg and Poland are not impacted by the proceedings in the United States, Canada or the United Kingdom.

Sungard is advised by Akin Gump Strauss Hauer & Feld LLP, Jackson Walker LLP, Cassels Brock & Blackwell LLP, FTI Consulting, Inc., DH Capital, LLC and Houlihan Lokey Capital, Inc.

Sungard is a Wayne, Pa.-based provider of disaster recovery services, managed IT services, information availability consulting services and business continuity management software. The Chapter 11 case number is 22-9001.

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