eg solutions (“egs”) shareholder and strategic partner Aspect Software Inc (“Aspect”) has filed for Chapter 11 bankruptcy protection in the US. The filing is a “consensual restructuring” of Aspect’s debt structure and general unsecured creditors will be paid in full. We understand this process is unrelated to business activities undertaken with egs, and egs management have stated they expect no impact on earnings from Aspect’s restructuring.
Aspect has filed for Chapter 11: On 9 March 2016 Aspect submitted a petition for bankruptcy protection in the U.S. Bankruptcy court for the District of Delaware. The filing has been backed by Aspect’s creditors. $320m of debt is to be re-organised with an additional $60m converted into equity. The company expected to emerge from Chapter 11 under the control of its existing creditors. Although a date for the hearing is yet to be set, Aspect expects the process to complete within 105 days.
An eg solutions shareholder and strategic partner: Aspect is a 9.5% equity shareholder in eg and has board representation, having nominated non-executive Director Bob Krakauer to the eg board. The relationship dates back to 2013, with the signing of a strategic partnership agreement: Aspect is one of the largest Workforce Optimisation (“WFO”) software providers globally and is a third-party distributor of the eg intelligence suite in several geographies including North and South America and Asia Pacific
Filing a result of a sub-optimal capital structure: Over recent years, Aspect has invested a large amount building a significant global presence. We believe, however, that high levels of debt in the Aspect capital structure are generating high interest payments, which the proposed Chapter 11 reorganisation should reduce or remove.
Negligible impact on egs: eg solutions may have creditor balances in the books of Aspect, although the filing suggests that these would be paid in full. The other risk, an overhang of stock, is also unlikely to materialise as the apparent purpose of the filing is to allow a restructuring of debt instruments rather than facilitate disposal of assets.
Although unhelpful news flow, we see no impact on eg’s earnings from the reorganisation of Aspect. As recent results have demonstrated, the business is reporting strong momentum and revenue visibility remains high. The group’s cash position is also strong. We therefore approach the FY15/16 results due on March 23rd with a high degree of optimism. 50 55 60 65 70 75 80 Mar-15 Jun-15 Sep-15 Dec-15 Price (p) ANALYSTS Blaine Tatum firstname.lastname@example.org Gareth Evans 5156 email@example.com YEAR TO JAN 2014A 2015A 2016E 2017E 2