Aspect Software Parent Inc. won a Delaware federal judge’s approval Monday to shorten its already fast-moving Chapter 11, putting it closer to the finish line of a plan that will chop about $372 million from the call center company’s nearly $1.2 billion in prebankruptcy liabilities.
U.S. Bankruptcy Judge Mary F. Walrath said she would authorize a May 24 confirmation hearing “reluctantly” after reviewing the company’s revised disclosure statement and reorganization plan, and after an attorney for the Office of the U.S. Trustee said the agency would not object to shortened response periods.
Aspect earlier this month said every day spent as a Chapter 11 debtor put the company at a disadvantage in the highly competitive call center and customer service hardware and software market, and created difficulties for attracting and keeping customers.
“We think this is really important, and can be really maximizing to the company to get out of bankruptcy before the end of May,” Aspect attorney William A. Guerrieri of Kirkland & Ellis LLP said at Monday’s hearing.
Under the company’s updated disclosure, approved Monday, Aspect was to borrow up to $10 million for bankruptcy financing. First-lien lenders will have a choice between taking a share of equity in the reorganized company or rights under a new senior term loan for $447.2 million, due to mature in four years, with overall recoveries estimated at 98.6 percent.
Holders of $320 million in second-lien debt will have rights to purchase $60 million to $90 million in payment-in-kind notes that automatically convert to equity.
Unsecured claim holders will be paid full, in cash, while about $100 million in prebankruptcy shareholder equity will be wiped out, as will guarantee or damage claims.
Plans now call for filing of a plan supplement by May 7, with objections due May 17 instead of May 27, and responses due May 20 instead of June 3.
Linda Casey, an attorney for the Office of the U.S. Trustee, said the company had agreed to service by overnight mail to offset the shortened schedule.
Aspect sought protection from creditors March 9 and initially proposed a $30 million debtor-in-possession loan from senior prepetition lenders, but encountered pushback from Casey’s agency, which viewed the amount as too high given the company’s remaining funds and cash flow.
Company filings show Aspect expects to have $12.3 million of net, after-tax income on $223.5 million in revenues from all sources for the six months ending on Dec. 31. Full-year net income would rise to $19.8 million on $466.5 million in overall revenues, a 4.2 percent margin.
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.
Industry mergers and consolidations have increased competition in the industry globally, the company has said in court filings. Competitors are now able to operate across a wide area, and businesses struggling to keep up with technology updates and innovations as well as changing company needs.
Earlier this month, Judge Walrath approved a $3.85 million plan to provide a performance award program for top managers. Aspect said the incentive were important for the company. Managers’ salaries are below the industry’s median, according to court testimony, making the workforce vulnerable to poaching by competitors.
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.
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