Sungard AS's chapter 11 bankruptcy is a debt-for-equity swap.

Edward Gately, Senior News Editor

May 2, 2019

2 Min Read
Bankruptcy with Gavel

Sungard Availability Services (Sungard AS) has filed for chapter 11 bankruptcy with a pre-negotiated plan to reduce its nearly $1.3 billion debt and transfer control to a group of creditors.

And unlike many other industry bankruptcies, Sungard AS is seeking to exit chapter 11 now, according to Eric Snyder, a partner at New York City-based law firm Wilk Auslander and chairman of the firm’s bankruptcy department.

Last month, Sungard AS said it expects to emerge from bankruptcy very shortly after filing.


Wilk Auslander’s Eric Snyder

“Even if the court does not approve their plan today, it will almost certainly occur within 30 days,” Snyder said.

The filing is part of a consensual agreement with a majority of its creditors to reduce its debt by more than two-thirds. Sungard AS is the second major company in the channel to file for chapter 11 this year. Windstream filed for chapter 11 in February.

Sungard AS issued the following statement Thursday:

“The company confirms that it has filed the Chapter 11 petition, as anticipated, with the United States Bankruptcy Court Southern District of New York. Because the company has the requisite number of votes to confirm the restructuring plan, we expect to emerge very quickly — potentially within days. The company is committed to keeping all interested parties informed, and will comment further when we have an update on the process and planned emergence timeline.”

“This is a debt-for-equity swap where the secured and unsecured creditors are reducing their outstanding claims … from $1.261 billion to $450 million in exchange for ownership of the company,” Snyder said. “These type of arrangements are common, especially with companies that were the subject of leveraged buyouts, as was the case here.”

The restructuring support agreement (RSA) is funded by a $100 million credit facility, which will provide the liquidity necessary to continue to implement the company’s business plan, including funding working capital, and operational and capital expenditures during the process. Once the restructuring is complete, Sungard AS’ creditors will own the company’s equity.

“The company wins because it reduces its debt by two-thirds, and keeps an opportunity to survive and hopefully grow free of a lot if debt obligations,” Snyder said. “The employees win because they get to retain their jobs in the hopes the company survives. The creditors hope that by reducing the debt, they can, as owners, make the company profitable and recover some of their losses.”

Sungard AS will emerge stronger, however, “whether the steps taken here will be enough in this competitive environment, only time will tell,” he said.

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About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

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