Dual-Tracking Expedited Bankruptcy: Skillsoft Enters Chapter 11 with Options

Morgan Lewis

Morgan Lewis

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.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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