Sungard Availability Services Capital, Inc. – Move Over Fullbeauty, Plan Confirmation Sets Chapter 11 Speed Record, with $911mn of Debt Erased in 20.5 Hours

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May 2, 2019 – Just after 9pm on May 1st (21:04:47 to be exact), the Court hearing the Sungard Availability Services Capital cases acknowledged receipt of the lead Debtor's lead Chapter 11 Petition. Just 20.5 hours later (17:31:42) the Court's confirmation order was filed. For the second time in four months, Judge Drain of the Southern District of New York (yes, he also presides over the Sears Holdings cases) has set a Chapter 11 speed record; the previous record holder being the Fullbeauty cases that Judge Drain confirmed on February 5, 2019.

The end result of the restructuring will be exit of the Debtors' private equity sponsors (see list below) and the issuance of new equity to holders of the Debtors' "Credit Agreement Claims" and "Notes Claims" and the extinguishment of $911mn of funded debt (see also the summary of the Debtors' pre- and post-Chapter 11 capital structure below).

On April 2, 2019, the Wayne, PA-based Debtors announced that they had entered into a consensual agreement with a majority of its creditors to reduce Sungard AS’ debt by over two-thirds. The debtors’ press release stated, “The restructuring contemplated by the Restructuring Support Agreement (RSA) is funded by a $100 million credit facility, which will provide the liquidity necessary to continue to implement the Company’s business plan, including funding working capital and operational and capital expenditures during the expedited restructuring process. Once the restructuring is complete, Sungard AS’ creditors will own the Company’s equity.”  

Andrew A. Stern, the Debtors’ Chief Executive Officer, added  “A diverse group of lenders came together very quickly, reaching an agreement that results in an appropriate capital structure that enables us to continue focusing on operating and growing our business. Our creditors recognize the value in what we’ve built and are investing new capital into the business. Sungard AS will emerge from this process as a much stronger company, continuing to service existing and new customers well into the future.”

Plan Overview

In documents filed with the Court, the Debtors provided the following detail as to the Plan: “The Plan implements a pre-packaged restructuring agreed to by and among the Debtors and the Debtors’ major stakeholders, including Holders of more than 75% in amount of the Credit Agreement Claims, Holders of more than 85% in amount of the Notes Claims, certain of their respective affiliated entities and investment funds, and the Debtors’ prepetition equity Sponsors, which will result in a significant deleveraging of the Debtors’ capital structure, as reflected in the chart below:

Capital Structure as of April 1, 2019

Post-Emergence Capital Structure

Principal Outstanding

Total Commitments

Revolver Loans

$35 million

Exit Revolver Facility

$50 million

2021 Term Loan

$421 million

Exit Term Loan Facility

$100 million

2022 Term Loan

$380 million

New Term Loan

$300 million

Notes

$425 million

Total

$1,261 million

Total

$450 million

The anticipated benefits of the Plan include, without limitation the following:

  1. conversion of approximately $1,006 million of Credit Agreement Claims (which include accrued and unpaid interest through May 1, 2019 and approximately $155 million on account of the Acceleration Makewhole Premium) to a combination of approximately 89% of the equity in the Reorganized Sungard AS and a $300 million new senior secured term loan facility (the “New Term Loan”); provided, however, that the Acceleration Makewhole Premium Settlement Amount (as defined below) which otherwise would have been distributable to the Holders of Allowed 2022 Term Loan shall instead be distributed Pro Rata to the Holders of Notes Claims;
  2. conversion of approximately $447 million of the Notes Claims (which include accrued and unpaid interest through May 1, 2019) to approximately 11% of the equity in the Reorganized Sungard AS plus each Holder of a Notes Claims shall receive such Holder’s Pro Rata share of and interest in the Acceleration Makewhole Premium Settlement Amount;
  3. prompt emergence from chapter 11;
  4.  access to capital in the form of a new first lien priority revolving credit facility with aggregate commitments of up to $50 million (the “Exit Revolver Facility”);
  5. a debtor-in-possession financing facility in the aggregate principal amount of up to $100 million that will convert, upon satisfaction of the applicable conditions, into an exit facility (the “Exit Term Loan Facility”), which facility shall be secured by liens on all Collateral (as defined in Exhibit D-1 to the Restructuring Support Agreement (the “Exit Term Sheet”)), subject to (i) first priority on all Term Priority Collateral (as defined in the Exit Term Sheet) and (ii) second priority on all Revolver Priority Collateral (as defined in the Exit Term Sheet) ;and
  6. the New Term Loan in the aggregate principal amount of $300 million, which shall be junior to both the Exit Revolver Facility and the Exit Term Loan facility.

Plan Voting Results

The Debtors’ claims agent provided the following detail as to the two classes that were entitled to vote under the Plan [Docket No. 18]:

  • Class 3 (“Credit Agreement Claims”) – 217 claims holders representing $814.3mn (100% in amount) and 100% in number voted in favor of the Plan.
  • Class 4 (“Notes Claims”) – 63 claims holders representing $368.6mn (100% in amount) and and 100% in number voted in favor of the Plan.

Pre-petition Equity Holders (5% or more)

Equity Holders

Percentage of Equity

Bain Capital Integral Investors, LLC

14.16%

Blackstone Capital Partners IV L.P.

7.60%

Blackstone GT Communications Partners L.P.

5.99%

KKR Millennium Fund L.P.

14.07%

Providence Equity Partners V LP

7.63%

Silver Lake Partners II, L.P.

14.28%

TPG Partners IV, L.P.

8.60%

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

  • Class 1 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
  • Class 2 (“Other Priority Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
  • Class 3 (“Credit Agreement Claims”) is impaired and entitled to vote on the Plan. Expected recovery is 50% to 73%.
  • Class 4 (“Notes Claims”) is impaired and entitled to vote on the Plan. Expected recovery is 7% to 14%.
  • Class 5 (“General Unsecured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
  • Class 6 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%.
  • Class 7 (“Intercompany Claims”) is unimpaired / impaired and not entitled to vote on the Plan. Expected recovery is 0%/100%.
  • Class 8 (“Intercompany Interests”) is unimpaired / impaired and not entitled to vote on the Plan. Expected recovery is 0%/100%.
  • Class 9 (“Interests in Sungard AS”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%

Exhibits attached to the Disclosure Statement:

  • Exhibit A: Joint Prepackaged Plan of Reorganization
  • Exhibit B: Restructuring Support Agreement (and exhibits thereto)
  • Exhibit C: Liquidation Analysis
  • Exhibit D: Valuation Analysis
  • Exhibit E: Financial Projections
  • Exhibit F: Corporate Organizational Chart

About Sungard Availability Services

The Debtors describe themselves as follows: “Sungard Availability Services is a leading provider of critical production and recovery services to global enterprise companies. Sungard AS partners with customers across the globe to understand their business needs and provide production and recovery services tailored to help them achieve their desired business outcomes. Leveraging more than 40 years of experience, Sungard AS designs, builds and runs critical IT services that help customers manage complex IT, adapt quickly and build resiliency and availability.”

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