Skillsoft, a US-based e-learning company owned by private equity firm Charterhouse Capital Partners, has filed for pre-packaged chapter 11 bankruptcy to reduce its debt burden of around $2 billion.

The firm said it had agreed to a restructuring process with the majority of its lenders that would help slash its debt burden to $410 million.

Skillsoft filed for bankruptcy in Delaware, a low-tax US state where it has registered assets and liabilities of between $1 billion and $10 billion.

The firm said that it expects to have liquidity of around $50 million following the restructure, and, in the meantime, no employees will be affected and clients will continue to be serviced.

Skillsoft did not say whether the restructure was related to Covid-19 or the financial effects of the pandemic.

Companies which file for chapter 11 bankruptcy are typically on the verge of going bust but believe that, following a reorganisation of assets, debts and strategy, can once again become profitable.

John Frederick, Skillsoft’s chief administrative officer, said: “Today’s announcement marks an important step forward in significantly strengthening Skillsoft’s capital structure and positioning the company for long-term success.

“While our core business remains strong, with attractive profitability and cash flow characteristics, our debt levels are too high. We need to invest further and that requires our debt levels to come down to free up cash to further enhance our offerings.

“We look forward to benefitting from a stronger balance sheet and enhanced financial flexibility as we continue investing in new products, solutions and content to drive value for our customers and growth in the business.”

Following the restructure, Skillsoft said that net debt would total around 3.5-times EBITDA recorded for the last 12 months. 

No changes to Skillsoft’s organisational structure or leadership team are expected, it said.

Weil, Gotshal & Manges is serving as legal counsel to Skillsoft; Houlihan Lokey is serving as investment banker; and AlixPartners is serving as financial advisor.

Charterhouse bought Skillsoft for $2.3 billion in 2014 from Berkshire Partners, Bain Capital and Advent International, its former private equity sponsors.

Though the terms of the deal were not officially disclosed, the vast majority of leveraged buyouts executed by private equity firms add considerable sums of debt to a target company’s balance sheet.  

Date published: 15 June 2020

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