Enterprise backup and business continuity provider promises business as usual as it goes through Chapter 11 process
The big question floating around the channel is what went wrong at Sungard Availability Services, which announced it will enter a pre-packaged Chapter 11 bankruptcy. In the process, creditors will assume control of the company.
The Lowdown: Sungard will enter Chapter 11 bankruptcy restructuring in May. Management made arrangements with creditors and bondholders to take over the company in exchange for a significant reduction in the company’s debt. Sungard management is promising partners and customers that it will operate as normal through the process.
The Details: Details about the restructuring are limited. The bankruptcy will reduce Sungard’s debt by two-thirds, although the company isn’t saying what the actual amount is. Sungard said it has the support of 75 percent of the
The Impact: Given the arrangements made between management and creditors, Sungard expects to enter bankruptcy in early May and exit quickly. It’s unclear whether current management will remain with the company after the restructuring. While management promises stable operations, Sungard partners and customers will likely experience pressure to change cloud backup providers.
Background: The Sungard bankruptcy seems almost too orderly for many people in the channel. The question remains: What happened at Sungard that led to such a radical restructuring? Sungard generates more than $1.4 billion in revenue and operates dozens of data centers around the world. While the cloud backup market continues to grow, maintaining the infrastructure is costly. Some speculate that Sungard will become an example of the high cost of building a cloud service that replaces legacy systems.
The Buzz: “A diverse group of lenders came together very quickly, reaching an agreement that results in an appropriate capital structure that enables us to continue focusing on operating and growing our business,” said Andrew A. Stern, CEO of Sungard Availability Services. “Our creditors recognize the value in what we’ve built, and are investing new capital into the business. Sungard AS will emerge from this process as a much stronger company, continuing to service existing and new customers well into the future.”