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Sungard Availability Sets Record for Fastest Chapter 11 Approval

  • Technology firm’s plan gets confirmed 19 hours after filing
  • Funds including GSO and Angelo Gordon take ownership of firm

Sungard Availability Services Capital Inc. set a record for the fastest U.S. bankruptcy with a pre-negotiated plan in place to slash its debt load and hand control to a new set of owners.

The technology company filed for Chapter 11 protection Wednesday in U.S. Bankruptcy Court in White Plains, New York, listing $1.4 billion of liabilities and $496 million of assets. Less than 20 hours after the filing Judge Robert Drain approved the reorganization plan which will allow Sungard to reduce its debt by about two-thirds as it continues to operate.

With support from a majority of its creditors, Sungard sped through its restructuring as quickly as it went in. At a hearing on Thursday Judge Drain said there was enough reason to confirm the plan on the short timeframe based on the solicitation process leading up to the filing and the lack of objections to the plan. The debtors started the voting process with creditors last month when it filed its original plan and disclosure statement. “This process does work, the parties do read them,” Drain said in court.

Best Path

“Negotiating a restructuring out of court with all stakeholders and then implementing it in one-day Chapter 11 case is the best path for the client” because there is less impact to the business, Jon Henes of Kirkland & Ellis, the debtors’ counsel, said in an interview.

The previous record for the fastest Chapter 11 process was held by retailer Fullbeauty Brands Inc., which emerged from its restructuring in under 22 hours.

Wayne, Pennsylvania-based Sungard offers technology-related disaster and recovery services, employing over 2,500 people and servicing around 3,250 customers, according to filings. The company is backed by six private equity sponsors -- Bain Capital, Blackstone Group LP, Providence Equity Partners, KKR & Co., Silver Lake Management and TPG Capital. The pre-packaged bankruptcy will give lenders including Blackstone’s GSO Capital Partners, Angelo Gordon & Co. and Carlyle Group control of the company.

Sungard AS was split from Sungard Data Systems in 2014 and remained in the hands of private equity owners as its parent was sold to Fidelity National Information Services Inc.

Long Talks

Sungard Availability spent months negotiating the terms of the restructuring with two creditor groups. A group holding both term loans and bonds led by GSO and Angelo Gordon hired law firm Akin Gump and investment bank PJT Partners to assist in the talks. A separate group of term-loan holders including Carlyle enlisted Jones Day as counsel and Houlihan Lokey as financial adviser.

Sungard’s industry is in a period of rapid transition as customers shift to cloud-based technology. The company struggled to invest in the business and service its debt obligations as it saw its revenue and cash flow steadily decline. Consolidated revenue fell 18 percent from around $1.2 billion in 2016 to $977 million in 2018, the company said in filings.

With its plan confirmed Sungard will emerge from its restructuring with around $450 million of liabilities through a debt-for-equity swap. Plans call for first lien lenders to receive around 89 percent of the reorganized equity, while noteholders will receive the remaining 11 percent. The company will have an implied equity value of around $358 million, according to filings.

Sungard is represented by restructuring law firm Kirkland & Ellis, investment bank Centerview Partners and restructuring adviser AlixPartners.

The case is: Sungard Availability Services Capital Inc., 19-22915, U.S. Bankruptcy Court, Southern District of New York (White Plains)

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This article appeared in its entirety in the May 2, 2019, edition of Bloomberg.