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Law360 (June 15, 2020, 10:48 AM EDT) -- Global digital training and talent management company Skillsoft Corp. opened a prepackaged Chapter 11 in Delaware early Monday, pressed by changes in its markets and the COVID-19 pandemic and aiming to cut more than $1.5 billion from its $2 billion in debt.
The company, which counts 65% of the Fortune 500 as customers along with thousands of businesses worldwide, said in an initial filing that it had been considering transformation or restructuring options for more than a year, citing over leveraged balance sheets, increased competition and changes to its markets.
"Like so many others, the company is also facing adverse near-term business consequences from the macroeconomic effects of the COVID-19 pandemic," John Frederick, Skillsoft's chief administrative officer, said in the company's Chapter 11 declaration.
"While the company has been successful in operating under its business continuity plan and has kept its operations largely uninterrupted in the midst of this global crisis, COVID-19 has or may impact several of the company's key business initiatives."
Skillsoft has described its businesses as providing a "customized, learner-centric approach to skills development" in areas that include leadership development, business skills, technology and development, digital transformation and compliance. Its services have reached some 36 million individuals to date.
Under the prepackaged plan, first-lien creditors would receive shares of $410 million in new term loans for their nearly $1.4 million in claims along with 96% of the reorganized company's equity. Second-lien creditors would receive 4% of the new equity and additional warrants for their $670 million in claims.
Unsecured creditors would be paid in full under the plan, meanwhile, while existing equity holder claims would be wiped out. Net debt would fall from about $2.1 billion to $536 million.
The case would be financed by a $60 million debtor-in-possession loan provided by a group of first-lien lenders, with members of the first-lien group also providing a $60 million in exit financing to cover the DIP and $50 million in additional funding.
Under the plan, Skillsoft's annual debt service would fall by $106 million per year, from $157 million to $106 million. The company described itself as overleveraged in its disclosure, with liabilities exceeding assets by more than 18-fold currently, with debt maturities looming both this year and next year. That debt-to-equity ratio would fall to 5.2 times under the plan.
The company retained Houlihan Lokey Capital Inc. as investment banker and Weil Gotshal & Manges LLP as counsel in December 2018 and brought in AlixPartners LLP as financial adviser in December 2019.
Skillsoft began marketing its businesses in October 2019, but by late April found it necessary to enter into forbearance agreements with first- and second-lien lenders who would have been due $42 million in debt and interest payments on April 30. Agreement on a restructuring plan with lenders was reached on June 12.
"The reduced debt burden and exit financing anticipated under the prepackaged plan will provide the debtors with sufficient liquidity, not only to continue funding their operations, but to make the necessary capital expenditures and investments to ensure that the company will remain an industry leader in corporate learning," Frederick said.
Skillsoft provides its learning content through its Percipio intelligent learning experience platform along with a talent development suite, SumTotal.
The company said that will continue normal operations during the restructuring process, without material disruption to its vendors, partners or employees.
Skillsoft Corp. and its affiliates are represented by Mark D. Collins, Amanda R. Steele and Christopher M. De Lillo of Richards Layton & Finger PA and Gary T. Holtzer, Robert J. Lemons and Katherine Theresa Lewis of Weil Gotshal & Manges LLP.
The case is In re: Skillsoft Corp., case number 1:20-bk-11532, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Katherine Rautenberg.
Update: This story has been updated with more information.
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