Delaware bankruptcy judge agreed Friday to give call center technology firm Aspect Software Parent Inc. access to up to $10 million of a $30 million stopgap financing package to help fund its case, despite opposition from the U.S. Trustee's Office that the loan isn't needed.
During a hearing in Wilmington, U.S. Bankruptcy Judge Mary F. Walrath batted down criticism from the U.S. Trustee's Office that the $30 million loan from a group of senior prepetition lenders, which aims to help fund what Aspect hopes will be a quick 100-day rework of nearly $800 million in debt, isn't necessary given the company's liquidity position.
Judge Walrath did not give a reason she was rejecting that portion of the bankruptcy watchdog's argument, but did uphold another part, rejecting a provision in the interim request for post-petition financing that would have given the lenders liens on the debtors' unencumbered assets.
Aspect had argued that the debtor-in-possession financing package was not only necessary, but critical to avoid irreparable harm to the company, which provides call center services to sophisticated global companies such as major airlines and financial services firms. The longer the company stays in Chapter 11, the more likely it is to lose customers in its “hypercompetitive” industry, and Aspect needs access to funds in case that happens, the debtors argued.
The DIP loan package is being extended by a group of prepetition lenders that also back an agreement to support a Chapter 11 plan to slash its debt by more than $300 million by restructuring existing debt, obtaining new funding and swapping debt for equity; one of the default provisions is the court's rejection of the plan support pact.
In court Friday, Aspect attorney Joshua A. Sussberg of Kirkland & Ellis LLP said nearly 90 percent of lenders were backing the agreement, which aims to pay general unsecured claims holders in full, and that the company was pushing to get through the entire process in 90 to 100 days.
“This company cannot survive for the long term in Chapter 11,” Sussberg told Judge Walrath.
Sussberg did say that Aspect was still exploring the possibility of a sale transaction, but that the company was “incredibly confident” it has already exhaustively explored that avenue during its yearlong prepetition marketing process.
Interim approval of the DIP loan package also faced a challenge from an ad hoc group of second-lien lenders being wiped out by the proposed debt rework plan. The ad hoc group's attorney John Henry Knight of Richards Layton & Finger PA said it was “aggressive and inappropriate” to tie the financing so closely to the plan support and agreement, and that its “ox was being gored” as a consequence.
Judge Walrath overruled the objection, saying that it was not unusual to tie a DIP financing package to a plan support agreement.
She agreed to sign a proposed order, with the changes regarding liens on unencumbered assets, when it is submitted under certification of counsel, and scheduled a second-day hearing for final approval in early April.
Aspect filed for Chapter 11 protection Wednesday, contending that it needed to refigure its debt structure as it worked to update its technology to have a better chance against cloud-based competitors vying for market share in the same space.
The company traces its roots to 1981 and specializes in call-center or contact management technology and services, as well as customer self-service software and systems and technology-based customer outreach.
But a spate of industry mergers and consolidations have given rise to competition from companies able to operate over a broad area, and the sector is now routinely rocked by disruptive and updated technologies, standards and customer needs, CEO Stewart M. Bloom said in a first-day declaration.
Aspect is represented by Domenic E. Pacitti, Michael W. Yurkewicz and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP and Joshua A. Sussberg, Aparna Yenamandra, James H.M. Sprayregen and William Guerrieri of Kirkland & Ellis LLP.
The U.S. Trustee’s Office is represented by Linda J. Casey.
The ad hoc group of second-lien lenders is represented by John Henry Knight of Richards Layton & Finger PA.
The case is In re Aspect Software Parent Inc., case number 1:16-bk-10597, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Jeff Montgomery. Editing by Philip Shea.
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