Singapore Chipmaker Blames Buyout in Bid for Quick Bankruptcy

(Bloomberg) -- Global A&T Electronics Ltd., the Singapore-based chip assembler plagued for a decade by the debt it took on under a TPG Capital and Affinity Equity Partners buyout, filed for bankruptcy with a plan to turn itself around by the end of this week.

The company cited more than $1.2 billion in debt from the 2007 private equity deal as the cause of its Chapter 11 bankruptcy in New York Sunday. Hefty interest payments prevented "GATE," as the company is known, from growing its business to meet customers’ needs, it said. A proposed reorganization plan would give noteholders new debt to satisfy their claims, according to court papers. Global A&T is seeking approval for the plan by Dec. 21.

The debt “has historically limited GATE’s ability to make critical capital expenditures and other investments in its business, jeopardizing GATE’s ability to continue to deliver cutting-edge products and services to its customers across the globe," General Counsel Michael Foreman said in a court filing.

A 2013 debt exchange still left Global A&T with unsustainable debt, and the company was bogged down by lawsuits brought against the company and the private-equity backers of the deal, it said. GATE has been pursued in court by bondholders since 2014, when a GSO Capital Partners fund and others cried foul over the exchange.

Agreements Reached

After more than three years of litigation in New York State Supreme Court over the validity of the exchange, the company finally has a plan to put the controversy behind it, Global A&T said in court papers Monday. Nearly all significant debt holders agree to the current reorganization proposal, which repays noteholders with new debt, leaves other claims untouched, and frees Affinity and TPG and the company from lawsuits over the debt exchange.

The company will go before U.S. Bankruptcy Judge Robert Drain in White Plains court Monday to seek approval of a fast-track to approve its plan without any outside funding. GATE said it could need more money through a debtor-in-possession financing package if it doesn’t complete its turnaround play before January 2018.

TPG and Affinity Equity Partners’s 2007 buyout took the company, previously known as United Test & Assembly Center Ltd., private for $1.77 billion. The company employs about 10,000 engineers, technicians, and corporate, legal and sales professionals in China, Singapore, Thailand and the U.S.

New Debt

The new plan will issue $665 million in 8.5 percent new secured notes due 2022, guaranteed by the company’s UTAC and UMS units. They will go to repay noteholders, along with 31 percent of stock in a new company. The remaining 69 percent of equity will go to affiliates of Affinity and TPG, according to the filing.

An Affinity unit that held some of the company’s junior debt will be excluded from the equity distributions, and $5 million of new notes that would have gone to it will go to other noteholders, according to court papers. All other claims, including taxes and secured claims, will be paid in full in cash, GATE said.

Representatives for Affinity couldn’t be reached outside of regular office hours for comment, and TPG didn’t have an immediate response.

Global A&T finally seemed to put its debt problem behind it when it announced a settlement in mid-September. Other bondholders had come forward to say they weren’t giving up their own lawsuit over the debt exchange, brought in 2017.

Read more background on the restructuring

Such disputes -- which plagued another distressed company owned by TPG, preppy retailer J. Crew Group Inc. -- arise when creditors try to leapfrog each other in the priority list to be repaid. The maneuver has been made easier by low interest rates that allowed companies to refinance and take on multiple layers of debt.

The case is: In re: Global A&T Electronics Ltd, 17-23931, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

--With assistance from Denise Wee and Dawn McCarty

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Dan Wilchins

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