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Aspect Software Opens Del. Ch. 11 Case With $795M Debt

09 March 2016

Arizona-based Aspect Software Parent Inc. took its 35-year-old call-center technology business into Chapter 11 in Delaware on Wednesday, citing the drag of a maturing $795 million debt burden at a time of rising competition and increasing demands for capital investments.

Company officials said in an initial disclosure that Aspect has a creditor-backed plan that would eliminate about $320 million in debt, mostly though conversions of debt to equity.

Aspect's CEO Stewart M. Bloom said in a bankruptcy declaration that the company had considered a bankruptcy sale as an alternative to the proposed plan, which will restructure existing debt, obtain new funding and swap debt for equity.

“A refinancing of the first lien secured obligations did not seem feasible” for Aspect, Bloom said, “and the magnitude of its cash interest payment obligations was unsustainable.”

The company’s restructuring plan includes a $30 million debtor-in-possession loan, with an anticipated emergence from Chapter 11 in 100 days. Four subsidiary companies also entered bankruptcy along with the parent company, with their restructurings to be administered jointly with Aspect’s.

Current equity holder assets would be canceled under the plan. Most of the company’s $445 million first lien term loan, meanwhile, would convert into a $386 million first-lien senior secured loan, reducing the company’s current $34 million annual debt service bill.

Aspect reported in its bankruptcy filing that the overall plan is supported by 33.3 percent of those holding debt from the company’s $30 million revolving loans, along with 94 percent of those possessing first lien term loan claims and 42 percent of those holding second lien notes.

The company, which traces its corporate roots to 1981, specializes in call-center or contact management technology and services, as well as customer self-service software and systems and technology-based customer outreach systems.

Aspect’s business units reported $410 million in revenues during its most-recent full fiscal year, an 8 percent decline that officials said was offset by an $8 million, or 17 percent, rise in the company’s cloud-focused operations.

Bloom said that industry mergers and consolidations have given rise to competition from companies able to operate over a broad area. He also said that Aspect’s business sector is characterized by “rapid, and sometimes disruptive” change involving new technologies and changing industry standards and customer needs.

The company listed Avaya, Genesys Laboratories, Cisco, Interactive Intelligence, Nice Systems, and Verint among its competitors.

Initial Chapter 11 filings included motions to support continued, regular operations, including payment of employee wages, utilities and critical vendors. The plan also includes development of a management incentive plan involving as much as 10 percent of the company’s new equity, to take effect as soon as practical after the effective date.

After reorganization, the company expects to have $386 million in outstanding first-lien term loan debt, a $30 million revolving loan debt availability and $60 million in convertible, payment in kind notes. General, unsecured claims will be paid in full.

The PIK notes will automatically convert into 25 percent of the company’s new equity if the reorganized company and its affiliates are unable to secure a corporate family rating of “B” by Standard & Poor’s and “B2” by Moody’s Investors Service within six months of the plan’s effective date.

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 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.

--Editing by Emily Kokoll.

Joshua A. Sussberg, P.C.