Private Equity-Backed Sungard Availability Files for Bankruptcy

(Bloomberg) -- Sungard Availability Services Capital Inc. filed for bankruptcy with a pre-negotiated plan in place to slash its debt load and hand control to a new set of owners.

The private equity-owned 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. If approved, the process 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 is seeking to speed through its restructuring as quickly as it went in. A combined first-day and confirmation hearing is scheduled for 2 p.m. New York time in front of Judge Robert Drain. The record for the fastest Chapter 11 process is 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.

If the plan is 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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