When time—and cash—are running out

Aspect Software, a provider of software and tech support for call centers, was running low on cash. Cash flow timing had changed dramatically because the foundations of the company’s business were shifting. Software that used to be housed on customers’ on-premise IT systems was now migrating to the cloud. The situation radically changed the payment timing for the systems and support services that Aspect Software sold. While the company was adapting operationally, the cash management and capital structure sides were put into place before those business model changes started to occur. Seasonally low cash flows exacerbated the problems, and Aspect was dangerously risking insufficient balances needed to fund immediate cash needs. The current private equity owners were being asked to provide cash while facing a nearly certain restructuring that would result in the loss of their equity ownership.

The numbers spelled out a stark and chilling message to Aspect’s board of directors: the company might soon become unable to meet its normal-course obligations and might certainly become unable to meet any upcoming debt repayment schedule. With the situation dire, the board hired AlixPartners to resolve cash flow issues and prepare for a bankruptcy filing.

Creditor support clears the way for a quick and orderly restructuring

Our team got to work to understand the company’s complicated worldwide cash structure as well as to develop a good understanding of the sales and operating forecasts. We doubled down on strict cash control and spending restrictions. We overcame multiple uncertainties to establish and support a restructuring template and to make sure the planned restructuring could be successful. We assisted in a smooth entry into Chapter 11, and we helped convince creditors to back the prearranged bankruptcy filing. The restructuring plan would reduce indebtedness by more than $300 million, lower the company’s leverage ratio to four times equity from more than eight, and slash interest outlays by nearly $30 million. With the freed-up cash, the company would become able to invest in transitioning the business model and stabilizing the business’s cash flow.

When it really matters

By stabilizing cash flows and developing a credible cash forecast, we facilitated creditors’ support for the prearranged bankruptcy filing and restructuring plan. We also prepped the company for its Chapter 11 filing and its emergence from Chapter 11 in just 77 days. Major secured creditors converted their debt to equity and have taken ownership of the restructured entity. With new funding and a rational approach to managing cash, Aspect Software has acquired breathing space to successfully adapt to a cloud-based business model. We continued supporting the company by seeing it through the crucial claims-resolution process that started when it emerged from bankruptcy.