Unitek Global Services, Inc. (“Unitek” or the “Debtor”) filed for bankruptcy under Chapter 11 of the Bankruptcy Code on November 3, 2014 in the United States District Court for the District of Delaware.
According to the Declaration of Andrew J. Herning, Chief Financial Officer and Treasurer of the Debtor, in Support of the Debtors’ Chapter 11 Petitions and First Day Motions (the “Herning Declaration”), the Debtors are a “full service provider of technical services to customers in the wireless telecommunications, public safety, satellite television and broadband cable industries in the United States and Canada.” While Unitek may not be a common household name, their customers are. They include, among others, DIRECTV, AT&T, Comcast, Sprint, T-Mobile, and Time Warner Cable.
Events Leading to Bankruptcy
The Debtor is a in an extremely competitive market in which there are a small number of large customers. This means that Unitek and its competitors are engaged in intense competition for the business. While Unitek was operating successfully, it discovered in April, 2013, that certain employees had engaged in fraudulent activities, which impacted its revenue recognition. Not only did this cost Unitek roughly $9 million to resolve, but it necessitated restating several years of financial statements and constituted events of default with some of Unitek’s creditors. Unitek has suffered continual losses since that time.
Objectives in Bankruptcy
Unitek has filed for bankruptcy in an effort to: (a) reduce its total operating company funded debt by approximately $90 million, excluding original issue discount costs; (b) obtain commercially reasonable, long term financing and access to incremental commitments that will enable it to support its future business needs; and (c) continue its relationship with DIRECTV, LLC, its largest customer.
To that end, prior to filing for bankruptcy protection, Unitek engaged in extensive negotiations with its lenders and created a fully consensual restructuring transaction to be implemented swiftly through a prepackaged chapter 11 plan of reorganization, or “Prepack”. As this case is a Prepack, it will move much more quickly than an ordinary case. Of note, on the same day as the bankruptcy petitions were filed, Unitek filed its Plan of Reorganization (the “Plan”).
The Plan provides for the following, among other things, to occur: (i) portions of Unitek’s secured debt will be converted into a new first lien debt facility; (ii) portions of Unitek’s secured debt will be converted into 100% of the equity in the reorganized Debtors; and (iii) allowed general unsecured claims will be paid or assumed by the reorganized debtor. Copies of the Plan are available on the Debtors’ restructuring website: http://dm.epiq11.com/UniTek.
Unitek is represented by the law firms Morgan, Lewis & Bockius LLP and Young Conaway Stargatt & Taylor, LLP. Unitek’s bankruptcy proceeding is before the Honorable Peter J. Walsh of the Delaware Bankruptcy Court, proceeding under case no. 14-12471. The next omnibus hearing is scheduled for December 3, 2014 at 11:00 a.m. The Confirmation Hearing is scheduled for December 12, 2014 at 9:30 a.m. and confirmation objections must be filed by December 5, 2014 at 4:00 p.m.
John Bird is a bankruptcy attorney with the law firm of Fox Rothschild LLP. John is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach John at (302) 622-4263 or at firstname.lastname@example.org.