Aspect Software Mulling Bid For Faster Exit From Ch. 11
Aspect Software Parent Inc. said Monday that it might seek a fast break out of its Delaware Chapter 11 after a scheduled April 25 disclosure statement hearing, an effort reportedly driven by competitive pressures and customer skittishness over the call center company’s financial status.
Company attorney Joshua A. Sussberg of Kirkland & Ellis told Bankruptcy Judge Mary F. Walrath that the firm might seek a shortened schedule for plan confirmation and $800 million debt restructuring after disclosure approval.
Aspect sought Chapter 11 protection from creditors in late March, saying it wanted to shed $300 million of the debt while also providing a full recovery for unsecured creditors. At the time of filing, the company said it hoped to emerge from bankruptcy in 105 days, a timetable that would have seen confirmation by early July.
“We may be asking for shortening of time on confirmation by a few weeks,” Sussberg said, estimating a mid- to late-May timeframe. He added that the goal is “to let this business move forward as expeditiously as possible.”
The timing question surfaced after Judge Walrath approved a performance award program for top managers under terms sealed from public view, over the limited objections of the Office of the U.S. Trustee.
Aspect sought approval to pay top employees 70 percent to 110 percent of undisclosed performance reward amounts, based on quarterly targets for recurring revenues and earnings before interest, taxes and depreciation, less restructuring costs.
Payouts under target levels would be as high as $3.85 million under “maximum overachievement” results.
The Office of the U.S. Trustee had filed a limited objection to the proposal, saying the company had not proven that the awards were more than an easy “layup shot” and bonus for workers.
But Aspect’s attorneys said the company needs an incentive for top managers whose salaries are currently below the industry’s median but whose performance is crucial to retaining customers and market share in difficult times.
“Call centers are absolutely fundamental to, say, an airline,” said Stephen C. Hackney of Kirkland & Ellis. “The airline wants to hear there’s not one iota of doubt about the call center. The creditworthiness of and robustness of parties who are providing the service to you is important.”
First quarter results already fall short of the 70 percent mark for EBITDAR, Hackney said, and employees eligible for the performance awards met only only 90 percent of recurring revenue targets.
“These are not mere layups. These are not come to work, play Minesweeper and six months later collect your bonus,” Hackney said. Even if employees beat their targets, he said, “this is not a plan that will push these guys to the top of the market by any means.”
Past incentive payments included equity shares that will be wiped out under the Chapter 11, Hackney said.
“I think it’s critical to keep this type of information under seal,” Judge Walrath said. “It is something that could allow a competitor to seek to steal away senior management, and I think they are critical to the success of the debtor.”
Aspect specializes in call-center or contact management technology and services, as well as customer self-service software and systems and technology-based customer outreach. Technological change and mergers have altered the business landscape, however, with off-premise, cloud-based systems displacing hardware-heavy systems installed at individual business sites.
The company’s restructuring plan will give control to first lien lenders, who can opt for an equity stake or participation in a new, $447.2 million senior term loan.
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.
