Sungard AS New Holdings, LLC – Court Confirms Cloud-Connected Infrastructure Solutions Provider’s Painful Second Amended Plan

October 17, 2022 – The Court hearing the Sungard AS New Holdings cases issued an order confirming the Plan element of the Debtors’ Second Amended Combined Plan and Disclosure Statement [Docket No. 763, with a revised Second Amended Combined Plan and Disclosure Statement (the “Combined Document”) and a related redline showing changes from the version filed on October 13, 2022 filed at Docket No. 751]. 

As revised (and now confirmed) the Plan includes last-minute amendments related to insurance and surety bonds; with the Court also now agreeing to serve as a "gatekeeper" in respect of "a Claim or Cause of Action of any kind against a Covered Party" moving forward. Further to this new gatekeeper mechanism, the Plan also includes broad new definitions for each of "Covered Claims" and "Covered Party."

Also at the October 17th hearing, the Court issued an order approving the $60.0mn sale of the Debtors’ North American Recovery Services (RS) business (the "Eagle Assets") to 11:11 Systems, Inc. We cover that sale order separately.

Case Summary

On April 11, 2022, Sungard AS New Holdings LLC and 11 affiliated Debtors (“Sungard” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 22-90018. At filing, the Debtors, leading providers of cloud connected infrastructure solutions, noted estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn.

On August 31, 2022, the Court hearing the Debtors’ cases approved the sale of the majority of the Debtors’ U.S. colocation services and network services to 365 SG Operating Company LLC (the “365 Sale Transaction”) [Docket No. 607] and on September 14, 2022, the Court approved the sale of substantially all of the assets exclusively relating to the Debtors’ cloud and managed services and mainframe as a service business (the “CMS Sale Transaction") to 11:11 Systems, Inc. (“11:11”) [Docket No. 659].

At that point, what remained unsold were the Debtors’ Eagle Assets; with the Debtors continuing in respect of those assets with a dual track Plan which contemplated an "Equitization Scenario" (ie a reorganization) around those assets if a sale could not be agreed. Ultimately a sale was, however, agreed; with 11:11 stepping in again as a purchaser. With that development, “the Debtors revised the Plan to remove the terms related to the Equitization Scenario and made other changes consistent with pursuing the Eagle Sale Scenario and a Wind-Down of the Debtors’ estates.”

On October 13, 2022, the Debtors filed a revised Combined Document which reflected a definitive toggle to the Eagle Sale Scenario, with the possibility of an "Equitization Scenario" no longer part of the Plan.

Plan Overview

The asset sale process may have found buyers for the Debtors’ three business lines, but not at prices that will see recoveries for most classes (see table below for the depth of the pain for a Plan that has first lien creditors getting less than 1%). The disappointing sale results (albeit apparently still preferable to an equitization path) mean that some senior prepetition debt that had been promoted further to the Debtors’ debtor-in-possession (“DIP”) financing arrangements will be “un-rolled,” ie lose that promotion. The Combined Document provides on this unusual reversal:

“[The] sale process did not produce bids at a value in excess of the two senior most tranches of the Term Loan DIP Facility, i.e. the Tranche A Term Loan DIP Facility Claims and the Tranche B Term Loan DIP Facility Claims. As a result, pursuant to the “Roll-Up Recharacterization” provision of the Final DIP Order, the full amount of the Tranche C Term Loan DIP Facility Claims will be deemed to be “un-rolled” and restored as prepetition Second Lien Credit Agreement Claims. The Tranche B Term Loan DIP Facility Claims are also subject to the Roll-Up Recharacterization as prepetition First Lien Credit Agreement Claims. As such, because the Debtors’ restructuring process (inclusive of any Sale Transactions consummated) did not result in value in excess of the Tranche A Term Loan DIP Facility Claims and Tranche B Term Loan DIP Facility Claims, the holders of Tranche C Term Loan DIP Facility Claims will not receive any recovery pursuant to the Plan. Although the Global Settlement contemplated a potential small cash distribution for General Unsecured Creditors, such distribution was contingent on the holders of Tranche C Term Loan DIP Facility Claims receiving a distribution pursuant to the Plan. Therefore, General Unsecured Creditors are not entitled to any recovery under the Global Settlement.”

The Second Amended Combined Document [Docket No. 734] notes, “In February 2022, when it became evident that a more comprehensive restructuring of the Company would be required, the Debtors retained restructuring advisors to assist with the development of possible restructuring alternatives. The Debtors, with the assistance of these advisors, explored various alternatives, including whether it was practicable to effectuate an out-of-court restructuring, and ultimately determined that an in-court restructuring was necessary. The Debtors began negotiations regarding potential restructuring transactions with the Ad Hoc Group in March 2022. These good-faith negotiations resulted in the applicable parties’ entry into the Restructuring Support Agreement, which is attached hereto as Exhibit B. In addition, as set forth above, in order to ensure a smooth landing into chapter 11, the Debtors obtained additional liquidity from certain members of the Ad Hoc Group in the form of the Bridge Financing in the amount of $7 million prior to commencing the Chapter 11 Cases. On April 11, 2022, the Debtors entered into the Restructuring Support Agreement with First Lien Lenders holding in excess of 80% of the term loans under the First Lien Credit Agreement and Second Lien Lenders holding in excess of 80% of the term loans under the Second Lien Credit Agreement. The Restructuring Support Agreement contemplated, among other things, that the Debtors would run a comprehensive sale process for a sale of all or any subset of their assets and would implement a chapter 11 plan pursuant to which (i) any Sale Proceeds would be distributed and (ii) the Debtors would reorganize around any assets and/or business lines not sold and would distribute Reorganized Debtor Equity to Holders of Term Loan DIP Claims and, as applicable, Credit Agreement Claims on account thereof.

The Debtors have entered into various amendments to the Restructuring Support Agreement, which, among other things, extended certain milestones for the restructuring and sale process.”

The following is an updated summary of classes, claims, voting rights and expected recoveries showing highlighted changes (defined terms are as defined in the Plan and/or Disclosure Statement; see also Liquidation Analysis below):

• Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claim is $15.7mn and expected recovery is 100%.
• Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 3 (“First Lien Credit Agreement Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claim is approximately $89.9mn – $102.0mn^FN and estimated recovery is 0.5%-0.6%. Each Holder will receive its Pro Rata share of the First Lien Sale Consideration plus such Holder’s Pro Rata share of any additional Cash and/or proceeds of any assets not included in the Sale Transactions available after repayment of the Term Loan DIP Facility Claims in full up to the Allowed Amount of such Holder’s First Lien Credit Agreement Claims.

^FN: The Allowed Amount of First Lien Credit Agreement Claims is subject to adjustment in accordance with the Roll-Up Recharacterization provision of the Final DIP Order

• Class 4 (“Second Lien Credit Agreement Claims”) is impaired, deemed to reject and not entitled to vote on the Plan.
• Class 5 (“Non-Extending Second Lien Credit Agreement Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. 
• Class 6 (“General Unsecured Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. 
• Class 7 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. 
• Class 8 (“Intercompany Claims”) is impaired, deemed to reject on the Plan and not entitled to vote on the Plan. Expected recovery is 0%.
• Class 9 (“Intercompany Interests”) is impaired, deemed to reject on the Plan and not entitled to vote on the Plan. Expected recovery is 0%. 
• Class 10 (“Existing Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.

Voting Results

On October 14, 2022, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 741], which were as follows:

• Class 3 (“First Lien Credit Agreement Claims”): 29 claim holders, representing $8,148,700.48 in amount and 100% in number, accepted the Plan.

Global Settlement 

In settlement of disputes with the Committee relating to entry of Final DIP Order, the Debtors, the Committee and the Required Consenting Stakeholders agreed to a global resolution of various matters in connection with the Debtors’ restructuring (the “Global Settlement”). The relevant components of the Global Settlement are as follows (the terms of which are summarized below but qualified by the terms of the Final DIP Order and specifically paragraph 49 of the Final DIP Order):

• The Required Consenting Stakeholders agreed to fund the Wind Down Amount.
• The Required Consenting Stakeholders agreed to fund an amount up to $4,050,000 on account of accrued, unpaid and allowed claims for postpetition rent for the period between April 11, 2022 and April 30, 2022 for any commercial real property lease to be paid promptly upon such allowance either as part of Cure Costs (as defined in the Bidding Procedures Order) or from the cash sale proceeds realized from one or more Sale Transactions, subject to a dollar-for-dollar reduction if such lease is assumed by a Successful Bidder, satisfied pursuant to any asset purchase agreement, or consensually agreed to by a landlord.
• The Required Consenting Stakeholders agreed to fund an amount up to $781,000 on account of claims subject to Bankruptcy Code section 503(b)(9) (the “503(b)(9) Claims”), subject to a dollarfor-dollar reduction to the extent any 503(b)(9) Claim is disallowed, reduced by agreement or court order, assumed by a successful bidder or otherwise satisfied during the Chapter 11 Cases (in the Debtors’ business judgment) or pursuant to another provision of an asset purchase agreement.
• Avoidance Actions shall be excluded from any sale of the Debtors’ assets with a commitment of the Debtors not to prosecute such actions or, if sold as part of a Sale Transaction, subject to a covenant not to sue.
• No General Unsecured Creditor will receive a distribution where the recovery to such General Unsecured Creditor exceeds the percentage recovery on the Tranche C Term Loan DIP Facility Claims, excluding General Unsecured Creditors paid under any Final Order approving any First Day Pleading, any General Unsecured Creditor whose lease or contract is assumed, or any General Unsecured Creditor that has an alternative source of recovery from outside the Debtors’ Estates.

[same language as above]…under the Global Settlement, the Debtors, the Required Consenting Stakeholders and the Committee agreed that no General Unsecured Creditor would receive a distribution in excess of the recovery for holders of Tranche C Term Loan DIP Facility Claims (the junior most tranche of the Term Loan DIP Facility). Despite an extensive Court-approved marketing process, such sale process did not produce bids at a value in excess of the two senior most tranches of the Term Loan DIP Facility, i.e., the Tranche A Term Loan DIP Facility Claims and the Tranche B Term Loan DIP Facility Claims. As a result, pursuant to the 'Roll-Up Recharacterization' provision of the Final DIP Order, the full amount of the Tranche C Term Loan DIP Facility Claims will be deemed to be 'un-rolled' and restored as prepetition Second Lien Credit Agreement Claims. The Tranche B Term Loan DIP Facility Claims are also subject to the Roll-Up Recharacterization as prepetition First Lien Credit Agreement Claims. As such, because the Debtors’ restructuring process (inclusive of any Sale Transactions consummated) did not result in value in excess of the Tranche A Term Loan DIP Facility Claims and Tranche B Term Loan DIP Facility Claims, the holders of Tranche C Term Loan DIP Facility Claims will not receive any recovery pursuant to the Plan. Although the Global Settlement contemplated a potential small cash distribution for General Unsecured Creditors, such distribution was contingent on the holders of Tranche C Term Loan DIP Facility Claims receiving a distribution pursuant to the Plan. Therefore, General Unsecured Creditors are not entitled to any recovery under the Global Settlement."

Key Documents

The Combined Document [Docket No. 734] attaches the following exhibits:

• Exhibit A: Organizational Structure 
• Exhibit B: Restructuring Support Agreement 

Plan Supplements [Docket Nos. 708 and 740] attach:

Docket No. 708

• Exhibit A: Liquidation Analysis
• Exhibit B: Plan Administrator Agreement
• Exhibit C: Retained Causes of Action
• Exhibit D: Sale Consideration Schedule

Docket No. 740

• Schedule 1: Schedule of Assumed Executory Contracts and Unexpired Leases and Proposed Cure Amounts

Restructuring Support Agreement

According to documents filed with the Court, the Debtors have entered into a restructuring support agreement (the "RSA"). In respect of the RSA, the Debtors state: "The Restructuring Support Agreement has the support of lenders that hold in excess of 80% of each of the Debtors’ Prepetition 1L Term Loan Obligations and Prepetition 2L Term Loan Obligations (collectively, the 'Consenting Stakeholders'), and contemplates that the Debtors will implement a consensual restructuring either through (i) a sale of all, substantially all or one or more subsets of the Debtors’ assets (the 'Sale Scenario') or (ii) the equitization of the Debtors’ prepetition funded debt through a chapter 11 plan (the 'Equitization Scenario').

In connection therewith, the Consenting Stakeholders establish a 'reserve price' for each group of the Debtors’ assets and, alternatively, for the assets comprising the Debtors’ business as a whole, and have agreed to cap any credit bid they may provide at the reserve price, such that if one or more third parties submits qualified bids that, standing alone or in the aggregate, exceed the applicable reserve price, the Consenting Stakeholders will not increase their credit bid."

The Robinson Declaration (defined below) states, "On April 11, 2022, Sungard AS and the other Company parties that are Debtors in these chapter 11 cases entered into the Restructuring Support Agreement with holders of in excess of 80% of the term loans under the Prepetition 1L Term Loan Credit Agreement and in excess of 80% of the term loans under the Prepetition New 2L Credit Agreement. The Restructuring Support Agreement contemplates a comprehensive restructuring achieved either through the Sale Scenario or through the Equitization Scenario.

The key components of the Restructuring Support Agreement are as follows:

• Sale Scenario: The Debtors will file a motion seeking approval of Bidding Procedures that will provide a structure for the sale of all, substantially all or one or more groups of the Debtors’ assets to one or more purchasers pursuant to Bankruptcy Code section 363. The Sale Scenario may be consummated pursuant to one or more of (x) an asset purchase agreement, (y) a share purchase agreement or (z) a plan of reorganization. As set forth above, in the event of a bid by the Consenting Stakeholder Purchaser (as defined in the Restructuring Support Agreement), the amount of any credit bid by the Consenting Stakeholder Purchaser as part of its proposed purchase price will not exceed a to-be-determined 'reserve price.'
• Equitization Scenario: Concurrently with the contemplated sale process, the Debtors will file and seek confirmation of a chapter 11 plan (the 'Plan'). Among other things, the Plan will provide for the distribution of equity in any reorganized Debtor to the Consenting Stakeholders (subject to dilution in connection with any exit financing, management incentive plan or post-effective date issuances)….
• In addition, Section 7.02 of the Restructuring Support Agreement permits the Debtors to, among other things, consider, respond to and facilitate 'Alternative Restructuring Proposals' (as defined under the Restructuring Support Agreement) and maintain and continue discussions with respect thereto.

In sum, the Restructuring Support Agreement provides the Company with the flexibility it needs to pursue value-maximizing transactions or reorganize for continued operation. Preserving value for the benefit of the Company’s stakeholders depends, in large part, on the Company’s ability to proceed swiftly to a viable exit alternative and minimize the effects of the Debtors’ chapter 11 cases on the value of the Company’s brand—a critical component of the value of the Company’s businesses — and the Company’s ongoing liquidity position. Given that customer sentiment in the industry shifts rapidly and stakeholders need their IT services running at all times, time is of the essence. The Company intends to proceed with a fair and efficient process to preserve and maximize value for all stakeholders, which ultimately will inure to the substantial benefit of all parties in interest."

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Robinson Declaration”), Michael K. Robinson, the Debtors’ chief executive officer and president, detailed the events leading to Sungard’s Chapter 11 filing. The Robinson Declaration provides:

The Prior Cases and Operational Challenges

"In 2018, it became evident that the Company’s legacy capital structure was no longer sustainable. At that time, the Company commenced efforts to improve its balance sheet while simultaneously ensuring that the Company’s customers could continue to trust and rely on the Company for its services. In connection therewith, the Company engaged in substantial discussions with its key stakeholders through the end of 2018 and into 2019 on the terms of a comprehensive restructuring transaction, which was ultimately memorialized in a restructuring support agreement with the majority of its then-existing capital structure (the '2019 RSA').

Pursuant to the 2019 RSA, on May 1, 2019, Predecessor Sungard AS and certain of its subsidiaries commenced the Prior Cases in the United States Bankruptcy Court for the Southern District of New York. On May 3, 2019, less than 48 hours after commencing the Prior Cases, the Company successfully emerged from chapter 11, having (i) reduced its funded indebtedness by over $800 million, (ii) preserved the value of the Sungard AS brand and (iii) protected the jobs of the Company’s invaluable employees.

All parties anticipated at the time that this swift and efficient balance-sheet restructuring would set Sungard AS on course to be a stronger company with a more sustainable capital structure, well positioned to pursue an investment and growth plan and service its existing and new customers. The Company, however, continued to face strong and often unexpected headwinds following its emergence from the Prior Cases.

While the Prior Cases addressed the Company’s significant funded debt obligations, the Company did not restructure its other fixed-costs — most notably, its lease expenses and capacity underutilization — in connection therewith. Specifically, while the Company’s leases for the Facilities are fixed long-term costs, the revenue the Company generates from those Facilities (such as the price of colocation rent) has been falling, depressing the Company’s margins. In addition to rent at its Facilities, the Company continues to be burdened by other sizable fixed costs, including equipment leases, software licenses, hardware maintenance, subcontracting and temporary labor costs and other Facility-related operating costs, such as security.

Moreover, the Company’s business plan was premised on transitioning from an infrastructure-focused vendor to a services-oriented partner to its customers. But faster than expected declines in demand for the Company’s legacy products (i.e., its infrastructure offerings) restricted the Company’s ability to invest in and grow its newer offerings to offset its losses….

Compounding these trends, the prolonged duration of the global pandemic has had a significant negative effect on various parts of the Company’s businesses and, in particular, its previously high-margin Workplace Recovery services segment. With traditional offices shifting rapidly to remote working environments due to quarantines, 'shelter in place' and 'stay at home' orders and other measures to control the spread of the virus, demand for the Company’s Workplace Recovery services has decreased dramatically. Even after quarantines were lifted, customers had realized that their workforces could work effectively remotely, reducing current and future demand for the Company’s Workplace Recovery services. In addition, many of the Company’s customers delayed spending decisions or reduced their IT costs, leading to further customer attrition through decisions not to renew contracts.

The Company’s challenges are reflected in its declining revenue. In 2019, the Company had revenue of approximately $833.4 million; by 2021, the Company’s revenue had fallen to approximately $587.3 million, a decline of 29.5% or $246.1 million. New customer contracts signed in 2019 and 2020 have been insufficient to replace revenue lost to non-renewal of contracts at expiration and renewals at lower prices, and long lead times for introducing new products and bringing new customers onto the Company’s systems and offerings prevent any improvements derived from new strategic initiatives and products from reversing the trend of revenue declines on the timeline necessitated by the Company’s liquidity position.

While the Company has continued to make substantial investments in its businesses and has attempted to sell assets, its cash flow projections demonstrate that, absent the commencement of these chapter 11 cases, the Company would not have a viable path to repay its existing debt.

The Company’s Prepetition Sale and Marketing Efforts

Following its emergence from the Prior Cases, the Company continued to engage in a series of discrete marketing and sale efforts to dispose of various non-core assets as contemplated by its business plan. To that end, in December 2019, the Company again retained an investment banker specializing in technology-based assets, DH Capital, LLC (“DH”), to carry out the potential asset sale processes… beginning on or around July 2021, the Company, through DH, launched a marketing process to solicit interest in a transaction that would include a carveout of one of the Company’s business units. These efforts remain ongoing, and the Debtors anticipate seeking authority to continue a sales and marketing process for all or any subset of their businesses in the near term while also continuing to negotiate with landlords.

Administration Proceedings in Relation to Sungard AS UK

As noted above, Sungard AS UK has faced particularly strong headwinds in recent months. Among other things, Sungard AS UK is a party to certain substantial leases that require the payment of above-market rent obligations, where the rent costs are not defrayed from revenue generated from the leased space because the aggregate facility space leased exceeds market demand and is thus (often substantially) under-utilized. This issue is compounded by the fact that, under its existing customer contracts, Sungard AS UK is unable to pass incremental energy price increases on to customers.

Sungard AS UK initially attempted to address these headwinds by engaging in negotiations with certain of its landlords in an effort to extract bilateral concessions, which would then (if obtained) have been combined with a statutory compromise of Sungard AS UK’s liabilities to all of its landlords through either a company voluntary arrangement (under UK insolvency legislation) (a 'CVA') or a restructuring plan (under UK companies legislation) (an 'RP').

To that end and against the backdrop of rapidly escalating energy costs, beginning on or around February 2022, Sungard AS UK accelerated its negotiations with its largest landlords in the hope of achieving a permanent material reduction in the liabilities owed to such landlords and negotiated with the shareholders of Sungard AS a commitment letter to support its operations if necessary. Concurrently with these negotiations and having obtained the SAS UK 11 Specifically, on February 3, 2022, Sungard AS UK together with non-Debtor affiliate Guardian iT, as borrowers, entered into a certain commitment letter that provides, subject to conditions, a commitment for a $20.5 million senior secured delayed draw facility (the 'SAS UK Commitment Letter') from certain existing shareholders of Sungard AS. The facility contemplated by the SAS UK Commitment Letter has not been documented or drawn….

While Sungard AS UK worked to obtain acceptable lease concessions that might have prevented an administration filing, Russia’s invasion of Ukraine heightened the liquidity challenges facing Sungard AS UK by causing an even more dramatic increase in energy costs. As noted above, Sungard AS UK was largely unable to pass these increased energy costs through to its customers under its existing customer contracts. Instead, Sungard AS UK was compelled to pay those increased energy costs from its own limited resources.

In light of Sungard AS UK’s unprofitability, the steep increase in energy costs, lack of viable funding to meet its obligations and lack of reasonable prospects for a consensual restructuring, the directors of Sungard AS UK determined that insolvency was unavoidable and that the appointment of administrators, pursuant to the UK Insolvency Act 1986, would be in the best interests of Sungard AS UK and its general body of creditors. Accordingly, on March 25, 2022, the directors appointed administrators to Sungard AS UK.12 The administrators are Benjamin Dymant and Ian Colin Wormleighton (collectively, the 'Administrators') of Teneo Financial Advisory Limited ('Teneo').

The administration of Sungard AS UK, without funding to continue the operation of its business (referred to as a 'shutdown' administration), could have had dire consequences for the Company as an overall enterprise and the Debtors, specifically. If faced with a shutdown administration, the Administrators likely would have: (i) advised all customers of Sungard AS UK that it was ceasing to operate; (ii) surrendered all leased sites to the landlords to avoid the continued incurrence of rent and other payments; (iii) notified all creditors that the business had ceased to operate and that they should stop all services and products from being provided or delivered to Sungard AS UK; and (iv) terminated employees, except for those necessary to complete a winddown of the assets or for those who serve global functions and would be employed by other Company entities.

The Company operates as a single global brand for its customers, who in turn may purchase multiple services from one or more entities in multiple jurisdictions. A cessation of the Company’s operations in the United Kingdom, with little warning or notice to its customers, would be diametrically opposed to the Company’s core business of providing uninterrupted mission-critical services — including to regulated banks, healthcare, the UK government, utilities and other large enterprises — eroding any trust those customers have in the Company. Simply put, the risk of contagion from a shutdown administration could have destroyed the value of the entire enterprise.

Accordingly, to preserve the value of Sungard AS UK’s assets in administration and to minimize disruption and damage to the rest of the Company, the directors of both Sungard AS and Sungard AS UK determined that a 'trading administration' —whereby the Administrators would continue operating the business of Sungard AS UK, while exploring the orderly sale of assets and the potential transfer of customer contracts to other suppliers — would be in the best interests of creditors of Sungard AS UK (and, by extension, the Company as a whole)… [T]he Debtors have obtained a commitment under the proposed DIP Facilities to allow for the continued funding of the administration, subject to the terms and conditions set forth in the DIP Term Sheet.

Debtors’ Prepetition Restructuring Efforts and Stakeholder Engagement

In February 2022, when it became evident that a more comprehensive restructuring of the Company would be required, the Debtors retained the services of Akin Gump Strauss Hauer & Feld LLP ('Akin Gump') as restructuring counsel and FTI Consulting, Inc. as financial advisor who, along with DH, began to assist with the development of possible restructuring alternatives. In addition, given the increasing likelihood that any restructuring would need to be effectuated through the commencement of chapter 11 cases and given that restructuring is not a core practice of DH, the Debtors determined to hire Houlihan Lokey Capital, Inc. ('Houlihan') as its restructuring investment banker."

Prepetition Indebtedness

• Prepetition ABL Facility Sungard AS, as a borrower, the other Debtor borrowers party thereto, the Debtor guarantors as guarantors thereto, PNC Bank, National Association as administrative agent (“Prepetition ABL Agent”) and the lenders party thereto from time to time (the “Prepetition ABL Lenders”) are parties to that certain Revolving Credit Agreement, dated as of August 6, 2019. The Prepetition ABL Credit Agreement provides for a $50 million senior secured revolving credit facility, with a sublimit of $20 million for letters of credit (the “Prepetition ABL Facility” and the obligations thereunder, the “Prepetition ABL Obligations”). As of the Petition Date, the Debtors owe approximately $29 million under the Prepetition ABL Credit Agreement and approximately $11 million of letters of credit were outstanding under the Prepetition ABL Facility.
• Prepetition Term Loans Sungard AS, as borrower, the other Debtor parties thereto as guarantors, Alter Domus Products Corp. as administrative agent (“Prepetition 1L Agent”) and the lenders party thereto from time to time (the “Prepetition 1L Term Loan Lenders”) are parties to that certain Credit Agreement, dated as of December 22, 2020. The Prepetition 1L Term Loan Credit Agreement originally provided for a $100 million senior secured term loan (the “Prepetition 1L Term Loan”). On April 7, 2022, the Prepetition 1L Term Loan was amended to increase the facility by an additional $7 million to provide the Debtors with sufficient operational liquidity to effectuate a smooth landing into chapter 11 (the “Prepetition Bridge Facility” and the obligations thereunder, the “Bridge Financing Obligations”). As of the Petition Date, the Debtors owe approximately $108.02 million under the Prepetition 1L Term Loan Credit Agreement (inclusive of the Bridge Financing Obligations).
• Further, Sungard AS, as borrower, and the Debtor Guarantors as guarantors thereto, Alter Domus Products Corp., as administrative agent (the “Prepetition New 2L Agent”) and the lenders party thereto from time to time (the “Prepetition New 2L Term Loan Lenders”) are parties to that certain Junior Lien Credit Agreement, dated as of May 3, 2019. The Prepetition New 2L Term Loan Credit Agreement provides for a $300 million senior secured term loan (the “Prepetition New 2L Term Loan”). As of the Petition Date, the Debtors owe approximately $277.62 million under the Prepetition New 2L Term Loan Credit Agreement.
• Finally, Sungard AS, as borrower, certain of the Debtor Guarantors as guarantors thereto, Alter Domus Products Corp., as administrative agent (the “Prepetition Existing 2L Agent” and, together with the Prepetition New 2L Agent, the “Prepetition 2L Agents”) and the lenders party thereto from time to time (the “Prepetition Existing 2L Term Loan Lenders” and, collectively with the Prepetition ABL Lenders, the Prepetition 1L Term Loan Lenders and the Prepetition New 2L Term Loan Lenders, the “Prepetition Lenders” and, together with the Prepetition ABL Agent, the Prepetition 1L Agent and the Prepetition 2L Agents, the “Prepetition Secured Parties”) as lenders are parties to that certain Junior Lien Credit Agreement, dated as of December 22, 2020. As of the Petition Date, approximately $8.9 million in principal amount of senior secured term loan under the Prepetition Existing 2L Term Loan Credit Facility.

Significant Shareholders

Angelo Gordon holds 24.548% of the Debtors' shares; Arbour Lane Capital Management holds 10.424%; Blackstone Credit holds 15.243%; Carlyle Group Inc. holds 11.647%; and FS/KKR Advisor, LLC holds 11.695%.

Liquidation Analysis (see Docket No. 708 for notes)

About the Debtors

According to the Debtors: “Sungard Availability Services (Sungard AS) is a leading provider of cloud connected infrastructure solutions serving enterprise customers from 75 hardened data centers and workplace recovery facilities in nine countries. Sungard AS has a 40-year track record of delivering resilient and highly available hybrid IT solutions. Backed by high-performance networks, Sungard AS modernizes customers’ end-to-end IT across connected infrastructure, cloud, recovery and workplace solutions. Working with customers to understand their business objectives, Sungard AS identifies gaps in customers’ current environments and tailors a solution to achieve their desired business outcomes.

Corporate Structure Chart

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