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iQor Holdings Inc. – Supplier of Business Process Outsourcing Solutions Solves Outsized Borrowings Incurred as Part of Jabil Transaction, Emerges from Bankruptcy Minus $513mn of Prepetition Debt

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November 19, 2020 – The Debtors notified the Court that their Prepackaged Chapter 11 Plan of Reorganization had become effective as of November 19th [Docket No. 225]. The Court had previously confirmed the Debtors’ Plan on October 14, 2020 [Docket No. 188].

On September 22, 2020,  iQor Holdings Inc. and 22 affiliated Debtors (“IQor” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 20-34500 (Judge Isgur). At filing, the Debtors, a managed services provider of customer engagement and technology-enabled BPO [business process outsourcing] solutions, noted estimated assets between $1.0bn and $10.0bn and estimated liabilities between $1.0bn and $10.0bn. 

 iQor was owned (prepetition) by private equity firm Huntsman Gay Global Capital (HGGC), The Rohatyn Group, Starr Investment Holdings, LLC and management.

In a press release heralding the exit from bankruptcy iQor stated: "iQor emerges from the Chapter 11 process with a strengthened capital structure, improved financial stability and having recapitalized its funded debt."

Gary Praznik, President and Chief Executive Officer of iQor, added: “Our swift emergence demonstrates the strong support of our new owners [but old first and second lien lenders]. We want to thank our customers and employees for their loyalty through this process. We start this next chapter as a stronger iQor, better positioned to deliver premium customer interactions, to assist our clients in today’s ever-changing customer experience landscape.”

Professional fee claims are due by January 4, 2021 (January 3rd falling on a Sunday).

Overview of Plan

The Debtors memorandum in support of Plan confirmation [Docket No. 174] summarizes the Debtors' view just prior to the Plan confirmation hearing: "In March 2020, the Debtors commenced comprehensive restructuring discussions with certain of their prepetition secured lenders (collectively, the ‘Ad Hoc Group’) around a potential deleveraging transaction. Amid these discussions, the worldwide outbreak of COVID-19 led to a shuttering of the global economy, which exacerbated the Debtors’ already-strained liquidity condition and accelerated the need to implement a strategic transaction. 

To address their near-term liquidity needs and forestall an imminent bankruptcy filing, in May 2020, the Debtors obtained $35 million of bridge financing under a superpriority facility provided by certain members of the Ad Hoc Group (the ‘Priority Term Loan Facility’). The incremental liquidity provided by the Priority Term Loan Facility afforded the Debtors additional time to explore potential restructuring opportunities. With this additional time, the Debtors successfully negotiated the framework for a consensual restructuring with their major creditor constituents, as set forth in a restructuring support agreement (the ‘RSA’) executed by holders of 100 percent in principal amount of Priority Term Loan Claims, approximately 85% in principal amount of First Lien Term Loan Claims, approximately 50% in principal amount of Second Lien Term Loan Claims, and the Sponsors. 

The Plan will deleverage the Debtors’ balance sheet by approximately $513 million and provide the Debtors with $155.0 to $177.5 million in exit financing, which will also fund the Debtors’ businesses upon emergence from chapter 11. Holders of First Lien Term Loan Claims will receive new term loans under the New Term Loan Facility and 95.75 percent of the New Common Stock, and Holders of Second Lien Term Loan Claims will receive 4.25 percent of the New Common Stock. Notably, the Plan leaves unsecured creditors unimpaired and will allow the Debtors to minimize disruptions to their go-forward operations while effectuating a value-maximizing transaction through the chapter 11 process."

The Disclosure Statement [Docket No. 51] provides as to the Debtors' prepackaged Plan, “As of August 30, 2020, the Debtors’ funded debt totals approximately $865 million, and approximately $823 million, or approximately 95 percent, of the Debtors’ total outstanding funded debt obligations are set to mature within the next two years. The Debtors’ capital structure consists of approximately:

  • $41.6 million outstanding in principal amount under the A/R Facility; 
  • $26.6 million outstanding in principal amount under the Priority Term Loan Facility;
  • $626.5 million outstanding in principal amount under the First Lien Term Loan Facility;
  • $170 million outstanding in principal amount under the Second Lien Term Loan Facility; and
  • $17.7 million of outstanding capital lease and note obligations.

The Plan will deleverage the Debtors’ balance sheet by approximately $513 million and refinance the remainder of the Debtors’ funded debt with $155 to $177.5 million in exit financing that will also fund the Debtors’ businesses upon emergence from chapter 11. Notably, the Plan leaves general unsecured creditors unimpaired and will allow the Debtors to minimize disruptions to their go-forward operations while effectuating a value-maximizing transaction through the chapter 11 process.”

The following is summary of classes, claims, voting rights and expected recoveries (defined terms are in the Plan and/or Disclosure Statement):

  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $17.7mn and the estimated recovery is 100%.
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $5.4mn and the estimated recovery is 100%. The projected Allowed amount of Claims for Class 2 set forth in this chart is exclusive of amounts that the Debtors will seek authority to pay under certain court-approved “first day” orders.
  • Class 3 (“Priority Term Loan Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A or $26.9mn and the estimated recovery is N/A or 100%.
  • Class 4 (“A/R Facility Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A or $41.9mn and the estimated recovery is N/A or 100%.
  • Class 5 (“First Lien Term Loan Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $636.1mn and the estimated recovery is 78%. Each Holder shall receive its Pro Rata share of (i) 95.75% of the New Common Stock issued pursuant to the Plan on the Effective Date, subject to dilution on account of the Management Incentive Plan; and (ii) the New Term Loans.
  • Class 6 (“Second Lien Term Loan Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $177.2mn and the estimated recovery is 5%. Each Holder shall receive its Pro Rata share of 4.25% of the New Common Stock issued pursuant to the Plan on the Effective Date, subject to dilution on account of the Management Incentive Plan.
  • Class 7 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $46.8mn and the estimated recovery is 100%. Each Holder of an Allowed General Unsecured Claim shall receive, in full and final satisfaction of such Claim, either: (i) reinstatement of such Allowed General Unsecured Claim pursuant to section 1124 of the Bankruptcy Code; or (ii) payment in full in cash on (A) the Effective Date or (B) the date due in the ordinary course of business in accordance with the terms and conditions of the particular transaction giving rise to such Allowed General Unsecured Claim; provided, however, that each Holder of Sponsor Management Fee Claims shall be conclusively deemed to have waived any recovery on account of its Sponsor Management Fee Claims and the Sponsor Management Fee Claims shall be cancelled and released without any distribution on account of such Claims.
  • Class 8 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0% or 100%
  • Class 9 (“Intercompany Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0% or 100%
  • Class 10 (“Existing Preferred Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0%.
  • Class 11 (“Existing Common Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0%.
  • Class 12 (“Other Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and the estimated recovery is 0%.

Voting Results

On August 31, 2020, the Debtors commenced a solicitation of Plan in respect of their Prepackaged Plan of Reorganization. On September 11, 2020, the claims agent notified the Court of Plan voting results [Docket No. 53], which were as follows.

  • Class 5 (“First Lien Term Loan Claims”): 155 claim holders, representing $617,749,000.44 (100%) in amount and 100% in number, accepted the Plan.
  • Class 6 (“Second Lien Term Loan Claims”): 88 claim holders, representing $148,854,175.04 (100%) in amount and 100% in number, accepted the Plan.

Events Leading to the Chapter 11 Filing

The Disclosure Statement provides: “Companies in the BPO industry constantly face an uphill battle to stay on the cutting edge of new technologies and evolving customer needs. The Debtors’ call center business has evolved from live agents handling inbound and outbound telephone calls to omnichannel contact centers that combine automated and live-agent options along with a host of non-voice platforms such as e-mail, SMS text messaging, and web initiated messaging. Consequently, the Debtors’ customers are looking to companies like iQor to develop and implement service offerings and technologies that can meet their customers’ evolving expectations. 

…in 2014, the Company entered into the aftermarket product servicing industry through the Jabil Transaction. At the time of the acquisition, the Company viewed the Jabil Transaction as an opportunity to expand and augment their already robust customer support service offerings. To finance the Jabil Transaction, the Debtors entered into the First Lien Term Loan Credit Agreement and the Second Lien Term Loan Credit Agreement to partially fund the $725 million purchase price which consisted of $675 million in cash and the issuance of 50,000 shares of Series S Preferred Stock to Jabil. While the Jabil Transaction transformed the Company’s business, the acquisition underperformed from the time of acquisition and resulted in the overleveraging of the Debtors’ capital structure. Notably, the Company faced economic and operational headwinds related to the Jabil Transaction as a result of (a) a breakdown in certain customer relationships prior to closing the Jabil Transaction, (b) the decline, and eventual demise, of the satellite television market (a significant revenue driver for the Company’s product support business), (c) the loss of significant product support customers due to technology-driven disruption and changing conditions in their own markets; and (d) a rapid shift in logistics capabilities in European markets that made a portion of the Company’s facilities unnecessary."

Key Documents

The Disclosure Statement [Docket No. 51] attached the following documents:

  • Exhibit A: Plan of Reorganization [Filed at Docket No. 50]
  • Exhibit B: RSA 
  • Exhibit C: ABL DIP Facility Term Sheet 
  • Exhibit D: ABL Exit Facility Term Sheet 
  • Exhibit E: Financial Projections 
  • Exhibit F: Valuation Analysis 
  • Exhibit G: Liquidation Analysis 
  • Exhibit H: Organizational Structure Chart

The Debtors filed Plan Supplements [Docket Nos. 162, 182, 183 and 224, respectively] which attached the following documents (Docket notation is as to most recently filed version):

  • Exhibit A: 1129(a)(5) Disclosure Regarding Directors and Officers [Docket No. 224]
  • Exhibit B: Schedule of Retained Causes of Action [Docket No. 162]
  • Exhibit C: Description of Transactions Steps [Docket No. 162]
  • Exhibit D: Form of New Organizational Documents [Docket No. 224] 
  • Exhibit D-3: Corporate Governance Term Sheet [Docket No. 183]
  • Exhibit E: Form of New Term Loan Documents [Docket No. 224]
  • Exhibit F: Form of Term Loan Exit Facility Documents [Docket No. 224] 
  • Exhibit G: Form of ABL Exit Facility Document [Docket No. 224] 

Liquidation Analysis (see Exhibit G of Disclosure Statement for notes)

About the Debtors

According to the Debtors: “iQor is a managed services provider of customer engagement and technology-enabled BPO solutions. With 35,000 employees in 9 countries, we partner with many of the world's best-known brands to deliver aftermarket product and customer support solutions that span the consumer value chain, from customer care and receivables management to product diagnostics and repair services. Our award-winning technology, logistics, and analytics platforms enable us to measure, monitor, and analyze brand interactions, improve business processes, and find operational efficiencies that lead to superior outcomes for our partners across the customer and product life cycles.  

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The post iQor Holdings Inc. – Supplier of Business Process Outsourcing Solutions Solves Outsized Borrowings Incurred as Part of Jabil Transaction, Emerges from Bankruptcy Minus $513mn of Prepetition Debt appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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