Sungard files for Chapter 11 bankruptcy

June 2022 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2022 Issue

Sungard Availability Services has filed for Chapter 11 bankruptcy just three years on from its previous filing.

In April, the company filed for bankruptcy protection in the US Bankruptcy Court for the Southern District of Texas with about $424m in secured debt and commenced proceedings in respect of its Canadian subsidiary under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice in Toronto, Canada.

During its last pre-packaged Chapter 11 filing, Sungard was able to reduce its debt by more than $800m, but that filing did not resolve “challenges inherent to the company’s operating structure”, Sungard said in a statement announcing the most recent filing. Among the issues behind the company’s second bankruptcy were high leasing costs and underused space. Furthermore, Michael Robinson, Sungard’s chief executive, blamed the coronavirus (COVID-19) pandemic and rising energy process for the filing. The company also cited other contributing factors for its financial difficulties, such as delayed customer spending decisions, reductions in IT spending, energy price inflation, and reduced demand for certain services.

To support its ordinary course of operations during the Chapter 11 process, the company secured access to $7m of bridge financing in advance of the filing. In addition, the company has received a commitment for up to approximately $95.3m in new money debtor in possession (DIP) financing from certain of its secured lenders. The company expects to complete the Chapter 11 process by mid to late summer 2022.

“Over the past three years, we’ve made significant network, product, and infrastructure investments which are being well-received by customers and gaining significant traction,” said Mr Robinson. “We believe the chapter 11 process is a right and critical step forward for the future of our business and our stakeholders.”

Sungard’s UK business is also looking for buyers after the company’s UK division entered administration at the end of March. The company, which employs around 300 people in the UK, and operates services for clients including JP Morgan and the Home Office, has turned to Teneo Restructuring to help with the crisis.

Teneo has obtained interim funding to trade the business as it looks for potential buyers. Benji Dymant, the company’s joint administrator, said that the short-term funding would provide “a platform to advance the company’s discussions with landlords, to optimise cost and space, and with customers, to pass through increased power costs”. He added: “The ability for the business to continue to trade in the medium to long term, either to enable a rescue of the business as a going concern or to deliver individual asset sales, will be reliant upon burden-sharing from both customers and landlords alike.”

Sungard’s operations in Ireland, France, India, Belgium, Luxembourg and Poland are not impacted by the proceedings in the US, Canada or the UK, the company confirmed in a statement.

According to Sungard, and based on the additional financing received, the company intends to meet its financial obligations, including paying suppliers in the normal course of business for goods and services delivered from today forward. The company has also filed customary motions to honour its ongoing commitments to employees and customers.

According to Sungard’s first bankruptcy filing, the company had debt of $1.4bn and assets of $496m. A group of creditors including Blackstone Group LP’s GSO debt investment unit, Angelo Gordon & Co., Carlisle Group and Contrarian Capital Management took control of the company.

Richard Summerfield