Riverbed Technology has filed for Chapter 11 bankruptcy protection with a view to implementing a “prepackaged” financial restructuring plan to eliminate debts of $1.1bn following struggles caused by the pandemic.
The SD-WAN and WAN optimisation biz first signalled intent to enter into a Restructuring Support Agreement last month, which it said is fully supported by all its voting lenders, as well as private equity majority owners, Thoma Bravo LLP and Ontario Teachers’ Pension Plan (OTPP).
In court papers [PDF] lodged with the US Bankruptcy Court for the District of Delaware, Riverbed president and CEO Dan Smoot said the “best option” is to “right-size its capital structure and position itself for long-term success.”
“Like many similar businesses, Riverbed faced significant COVID-19 related headwinds in 2020, including global supply chain disruptions and labor shortages, which adversely affected Riverbed’s financial performance,” said Smoot in supporting document [PDF]. “With factories shut down and stay-at-home orders instituted across the globe, Riverbed faced challenges maintaining its global supply chain as well as driving sales through a suddenly fully remote salesforce.”
The limitations caused by the pandemic and debt obligations – it was bought by Thoma Bravo and OTPP at the end of 2014 for around $3.6bn – “significantly constrained liquidity through 2020,” the CEO added.
“Compounding these challenges, one of Riverbed’s key markets – the wide area network optimization market – has experienced a general decline in recent years as part of a transition by organizations to alternative location-independent computing technologies.”
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The business, which employs 1,400 staff and sells to more than 30,000 customers, said the “sustained decrease in workforce participation and declined demand during the pandemic for Riverbed’s products and services” kept the pressure on liquidity, leading to the exploration of efforts to reduce its debts to its owners.
“After extensive, arm’s length negotiations, Riverbed and these key stakeholders (First and Second Lien lenders and equity sponsors) reached agreement on the comprehensive deleveraging and liquidity enhancing transactions set forth in the structuring support agreement.”
Riverbed will halve its $2bn debt through the financial restructuring, according to reports. Debt equity control will be passed to junior lenders and senior loan notes will be converted into new debts and preferred equity, the court filing states.
The financial arrangement will provide Riverbed with an additional $35m “cash infusion.” General unsecured claims – including trade, vendor, and employee claims – will be “unimpaired and reinstated,” the court papers say.
In a press statement, Smoot said:
Apollo Partner Chris Lahoud said: “We are pleased to continue our long-term support of Riverbed in this next chapter as they strengthen their financial position to deliver leading performance and visibility solutions to companies around the world.
“Riverbed has an exceptional team and strong market opportunities, and we are confident in their strategy to deliver innovative customer solutions and long-term profitable growth.” ®