Elearning company Skillsoft provided two expedited alternatives to bankruptcy in its first-day filings in the Bankruptcy Court for the District of Delaware.
In our recent LawFlash, Bankruptcy During COVID-19: Three Expedited Options, we highlighted several expedited Chapter 11 restructuring solutions available to borrowers and their stakeholders during the coronavirus (COVID-19) pandemic. COVID-19 has left many companies without sufficient liquidity (from revenues or debt) to afford operations—or almost any bankruptcy process.
As we suggested, expedited options such as prepackaged in-court restructurings or expedited sales are the growing tools of choice where debtors and creditors can achieve prefiling consensus on a plan to maximize value for all stakeholders. These tools are on full display in the recent Chapter 11 filing of elearning company Skillsoft Corp.
On June 14, Skillsoft and certain affiliates filed Chapter 11 petitions in the Bankruptcy Court for the District of Delaware. Skillsoft’s first-day filings included two expedited alternatives: (1) a prepackaged plan of reorganization sponsored by Skillsoft’s existing lenders and (2) a motion seeking authorization to consummate an alternative sale transaction as set out in an “Exclusivity Letter.” The Exclusivity Letter provides protections to the potential buyer in the proposed alternative sale transaction, including a $2 million upfront expense reimbursement for diligence and sale negotiations—and a two-month exclusivity period.
Skillsoft and its secured lenders believed the “alternative transaction” would maximize value for the estate, but the debtors were forced into bankruptcy before they could consummate it. The motion asserts that the potential buyer will continue to negotiate the sale if the court approves the Exclusivity Letter. If the parties successfully negotiate the “alternative transaction,” the debtors will amend the plan and disclosure statement accordingly.
It is unusual for debtors to seek buyer protections this early in a bankruptcy case, especially in the form of a first-day motion. Bankruptcy courts typically narrowly tailor first-day relief on an interim basis so that creditors can vet and challenge the first-day requests at a final hearing.
Here, however, Judge Walrath granted the motion and authorized the debtors to enter into the Exclusivity Letter. Skillsoft’s dual tracking of a prepackaged plan and sale process demonstrates the application of multiple expedited approaches to bankruptcy, and we will no doubt continue to see debtors and their stakeholders seek creative prenegotiated restructuring options in these unique circumstances.
The Morgan Lewis bankruptcy and restructuring team has experience in all of the options described above. We are available to discuss these strategies with any business presented with the need during these unprecedented times.
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
John C. Goodchild, III