On October 13, 2022 – In advance of their scheduled October 17th Plan confirmation hearing,* the Debtors filed: (i) a Second Amended Combined Plan and Disclosure Statement, (the “Combined Document”) which attaches a redline showing changes from the version filed on September 2, 2022 [Docket No. 734], (ii) a first amended Plan Supplement [Docket No. 740], (iii) a proposed Plan confirmation order [Docket No. 742] and (iv) Plan voting results [Docket No. 741] (see below).

* Postponed from October 3rd. The Debtors will also be seeking approval of the CMS Sale Transaction (defined below) at this hearing [agenda at Docket No. 745].

As amended, the Combined Document largely reflects the Debtors' efforts to work through outstanding objections in advance of their Plan confirmation hearing, with the Debtors noting in an omnibus reply to those objections [Docket No. 745, which contains a table of the objections and status of each] that they believe they have made sufficient concessions to address each of the objections.

The blackline also reflects the Debtors' definitive toggle to a sale transaction in respect of its Eagle Assets, with the possibility of an "Equitization Scenario" no longer part of the Plan.

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 the 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.”

Plan Summary

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%. Holder shall 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."

Updated Key Dates

Plan Confirmation Timeline

• Confirmation Hearing: October 17, 2022
• Entry of Confirmation Order: October 18, 2022
• Effective Date: October 31, 2022

Sale Timeline

• Sale Hearing: October 17, 2022
• Closing of Eagle Sale: October 25, 2022
• Closing of Bravo Sale Transaction: October 31, 2022
• Closing of CMS Sale Transaction: October 31, 2022
• Closing of Pantheon Sale Transaction: October 31, 2022

Key Documents

The Disclosure Statement [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

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.

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