Sungard files for Chapter 11 in the United States and aims to restructure • The Register
Cloud and data center provider Sungard Availability Services has filed for bankruptcy in the US and for its Canadian subsidiary, just weeks after its UK division went into administration.
The company cited tough economic conditions due to the COVID-19 pandemic and other trends, but intends to continue operations while seeking to accelerate the restructuring process it had already begun.
Sungard mentioned it had filed a Chapter 11 proceeding with the United States Bankruptcy Court in Houston, Texas, and had also filed the relevant proceedings with respect to its Canadian subsidiary through the Superior Court of Ontario Justice in Toronto.
Chapter 11 filing of declaration [PDF] reveals that Sungard currently has approximately $423 million in funded debt.
The company explained that its business is affected by challenges in its capital structure, aggravated by the pandemic and other macro-economic trends such as delays in customer spending decisions, reduced IT spending, inflation of energy prices and reduced demand for certain services.
The latter appears to be a reference to a drop in demand for the business continuity services offered by Sungard, as many companies have permanently transitioned to the work-from-home arrangements they adopted during the pandemic.
This is actually the second time Sungard has filed for bankruptcy. In 2019, he completed a “pre-packaged” Chapter 11 filing that reduced his debt by more than $800 million and brought $100 million in new financing to creditors.
However, it appears to have failed to provide a long-term solution to the company’s structural problems, cited as unprofitable leases and underutilized space. Sungard said it has been working to address these cost challenges over the past three years, but “recent factors” have led it to accelerate the restructuring of the U.S. operation “for the overall financial stability of operations. of Sungard AS”.
In a statement, its President and CEO, Michael K Robinson, said: “Over the past three years, we have made significant investments in the network, products and infrastructure that are well received by customers and are gaining popularity. We believe the Chapter 11 process is a fair and critical step forward for the future of our business and our stakeholders.”
Sungard said it secured access to $7 million in bridge financing ahead of Chapter 11 cases and received a commitment of up to $95.3 million in new debtor-in-possession (DIP) financing from some of its secured lenders. .
Based on this additional funding, Sungard said it intends to meet its financial obligations, including paying suppliers for goods and services delivered. He also said he filed the usual motions to honor outstanding commitments to employees and customers, which effectively means the organization expects to continue operating as normal, including providing service to customers.
However, it seems likely that any restructuring deal will either involve the sale of some or all of the company’s assets or an exchange of debt for equity, whichever maximizes the value of the company. The process should be complete by mid to late summer.
The move follows Sungard’s UK division taking over last month, also citing rising energy costs as a key reason. It currently continues to operate in business-as-usual mode while administrators review operations to “maximize value” for the company’s creditors.
Sungard said its other global operations in Ireland, France, India, Belgium, Luxembourg and Poland were not affected by the proceedings in the United States, Canada or the United Kingdom.
Additionally, in a letter sent to UK customers, seen by The register, the administrators in charge of the Sungard operation in the UK assured clients that the US Chapter 11 process had no impact on the administration process in the UK and that clients should “continue to engage with society on a regular basis”. ” ®