In the News Law360

Aspect Software's $1.2B Debt Rework Wins Court OK

Aspect Software Parent Inc. blazed toward the exit Tuesday from an abbreviated Chapter 11, securing a Delaware bankruptcy judge’s confirmation for the call center company’s plan to trim its $1.2 billion debt by $372 million, mostly through credit swaps to equity and debt cancellations.

U.S. Bankruptcy Judge Mary F. Walrath approved the Arizona-based company’s plan 76 days after it sought protection from creditors in early March. She was satisfied that the company was able to resolve all issues that surfaced along the way.

“For a whole host of business and other reasons, it truly is critical to maximizing value that the company emerge from bankruptcy as soon as possible,” said Aspect's attorney William A. Guerrieri of Kirkland & Ellis LLP.

Guerrieri said that the plan had won support from all creditor classes eligible to vote, and that the company could emerge from Chapter 11 as early as Wednesday, nearly a month sooner than the already fast-moving, 105-day schedule proposed at the time of the company’s Chapter 11 filing.

Under the plan, Aspect will 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.

Confirmation came only after Judge Walrath approved an exception to bankruptcy requirements for posting of collateral to cover some Aspect bankruptcy funds deposits in excess of Federal Deposit Insurance Corp. limits.

Without the exception, Guerrieri said, Aspect would have had to close the account involved and incur additional expense, while also possibly delaying the confirmation.

Linda Casey, an attorney for the U.S. trustee's office, said her agency would not oppose an exception to the requirement if approved by Judge Walrath.

Aspect had initially sought a fast-paced reorganization then stepped up its efforts in April, citing concerns over potential loss of current and future business because of customer concern over the bankruptcy. Clients such as airlines, the company said, focus heavily on call center reliability and want assurances that service providers are both creditworthy and financially robust.

Concern for the company’s workforce grew with each day in Chapter 11, Aspect reported in April. The firm’s basic pay rates are below the industry’s median, creating opportunities for competitors to lure away experienced employees.

The 40-plus-year-old company competes in the call center, customer contact and workplace management arena, a fast-moving industry repeatedly disrupted by technological advances.

More recently, the industry has been transformed by business consolidations and shifts from on-site systems to cloud-based setups supported, in Aspect’s case, by data centers across North America, Europe and Asia.

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.

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. et al., case number 1:16-bk-10597, in the U.S. Bankruptcy Court for the District of Delaware.