Skillsoft entered into a restructuring support agreement with a majority of its first and second lien lenders. The agreement is expected to result in a de-levering of the company’s balance sheet by reducing the company’s existing first lien and second lien debt to $410 million from approximately $2 billion, with total debt (including working capital financing) aggregating $585 million, lowering the company’s annual cash interest by approximately $100 million.
Weil, Gotshal & Manges is serving as legal counsel to Skillsoft, while Houlihan Lokey Capital is serving as investment banker and AlixPartners is serving as financial advisor.
Holders representing approximately 81% in value of Skillsoft’s first lien debt and 84% in value of the company’s second lien debt have executed the agreement, indicating their commitment to support the restructuring. The restructuring is expected to provide Skillsoft with additional liquidity and a right-sized pro-forma capital structure, while minimizing operational disruptions by ensuring all holders of general unsecured claims, including the company’s vendors, suppliers and other trade creditors, will be paid in full. Additionally, it is expected that no employees will be affected as a direct result of the restructuring.
The agreement provides that:
- Holders of the company’s first lien debt will receive their pro rata share of approximately $410 million in takeback first lien debt and 96% of the equity in the reorganized company
- Holders of the company’s second lien debt will receive their pro rata share of approximately 4% of the equity in the reorganized company, as well as warrants that will provide them with the opportunity to purchase up to 15% of the equity in the reorganized company at various price thresholds based on first lien debt holders achieving certain recovery levels
- Holders of general unsecured claims, including vendors, suppliers and other trade creditors, will receive payment in full in the ordinary course of business
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“Today’s announcement marks an important step forward in significantly strengthening Skillsoft’s capital structure and positioning the company for long-term success,” John Frederick, chief administrative officer of Skillsoft, said. “This is an exciting time for digital learning, and Skillsoft provides best-in-class learning solutions to thousands of customers around the world, including 65% of companies in the Fortune 500. While our core business remains strong, with attractive profitability and cash flow characteristics, our debt levels are too high. We need to invest further and that requires our debt levels to come down to free up cash to further enhance our offerings. We look forward to benefiting from a stronger balance sheet and enhanced financial flexibility as we continue investing in new products, solutions and content to drive value for our customers and growth in the business. We appreciate the broad support of our lenders, who will become the new owners of the company and recognize the inherent value in the Skillsoft brand. We also thank the entire Skillsoft team for their ongoing hard work and commitment to our company and our customers and are grateful to our vendors and business partners for their continued support.”
To implement the restructuring, Skillsoft and certain of its affiliates voluntarily filed prepackaged Chapter 11 cases in the U.S. Bankruptcy Court for the District of Delaware. The company anticipates commencing ancillary proceedings in Canada under the Companies’ Creditors Arrangement Act (CCAA) seeking recognition of the U.S. Chapter 11 proceedings in Canada.
Skillsoft is operating as normal and expects to continue operating in the normal course during and following the restructuring process, without material disruption to its vendors, partners or employees. In conjunction with the court-supervised process, Skillsoft received a commitment for $60 million in debtor-in-possession financing from certain of its first lien lenders. Following court approval, this financing, together with cash generated from ongoing operations, is expected to provide liquidity to support the company during the restructuring process.
Certain of the company’s first lien lenders also committed to provide the company with additional liquidity upon exit from the restructuring process in the form of a $110 million exit facility, less any amounts outstanding under the DIP financing, which will be rolled into the exit facility upon emergence. Skillsof expects to have liquidity of approximately $50 million upon completion of the restructuring process, with leverage at approximately 3.5x net debt-to-LTM EBITDA.
Skillsoft delivers online learning, training and talent solutions.
