UniTek files Chapter 11 bankruptcy, inks deal with lenders and DirecTV

By Caroline Salls

Pittsburgh, Nov. 3 – UniTek Global Services, Inc. made a prepackaged Chapter 11 bankruptcy filing on Nov. 3 in the U.S. Bankruptcy Court for the District of Delaware.

On Oct. 21, the company announced that it reached an agreement with its lenders, including affiliates of Littlejohn & Co. and New Mountain Capital, on the terms of a comprehensive debt restructuring.

UniTek said the restructuring would allow it to continue honoring its obligations and responsibilities to its employees, customers and vendors in the ordinary course of business, while significantly reducing its debt, reorganizing other financial obligations and creating a strong financial foundation for the company’s future.

The company said in a news release that it obtained votes in favor of the plan from all members of all three classes entitled to vote.

The company plans to request an early December plan confirmation hearing.

Restructuring terms

Specifically, the company said the terms of the restructuring provide for a substantial reduction of secured debt through a debt-for-equity swap of more than 40% as well as a substantial reduction in cash interest rate.

Portions of UniTek’s secured debt will be converted into a new first-lien debt facility and portions into 100% of the equity in the reorganized company.

In addition, the lenders agreed to advance up to $43 million of new capital to support UniTek’s recapitalization.

All valid unsecured claims will be assumed in the ordinary course of business and unimpaired.

Subordinated creditors and holders of existing UniTek interests will receive no distribution.

In addition to the restructuring agreement, the company, the lenders and UniTek’s largest customer, DirecTV, entered into a plan support agreement.

According to an 8-K filed with the Securities and Exchange Commission, term lenders that are affiliates of PennantPark Floating Rate Capital Ltd., Cerberus Capital Management, LP and Marblegate Asset Management, LLC became parties to the plan support agreement on Oct. 28, Oct. 29 and Oct. 31.

UniTek said the plan support parties now represent 100% of its revolving and term loan lenders.

Upon completion of the restructuring, UniTek will become a private company entirely owned by its lenders, the company said.

“As a result of this restructuring, we will be positioned as a financially sound competitor in the industries UniTek serves,” chief executive officer Rocky Romanella said in the release.

DIP financing

In connection with the bankruptcy filing, the company obtained a commitment for debtor-in-possession financing.

The proposed financing includes commitments to lend up to $43 million as term advances, $10 million in revolving commitments that will provide liquidity for working capital and general corporate purposes of the company’s DirectSAT business, commitments to purchase participations in, and reimburse the pre-bankruptcy ABL facility agent for any amount drawn under, a $3.7 million letter of credit and a roll-up of all outstanding letters of credit under the ABL facility as of the bankruptcy filing date.

Wilmington Trust is the DIP loan agent.

Interest will be either Base rate plus 750 basis points, with 100 bps payable in kind, or Eurodollar plus 850 bps, also with 100 bps payable in kind. The Eurodollar rate floor will be 1%.

The facility will mature on the earliest of Jan. 21, subject to two 30-day extensions, the effective date of a plan of reorganization and acceleration of the loans upon occurrence of an event of default.

The company is seeking interim access to $29.2 million of the term advances, the full amount of the revolving and letter-of-credit commitments and the letter-of-credit roll-up.

UniTek said in the 8-K that it entered into a sixth amendment to its pre-bankruptcy term loan agreement to extend restrictions on the transfer of loans by the term lenders.

Debt details

According to court documents, UniTek had $3.22 million in total assets and $186.05 million of total debt as of Sept. 30.

The company’s largest unsecured creditors are DirecTV, based in Pasadena, Calif., with a $7.61 million trade claim; Edward Monroe of Minneapolis, with a $5 million litigation claim; Skylink Ltd. of Wilmington, Del., with a $1.95 million transaction claim; and Automotive Rentals Inc. of Mt. Laurel, N.J., with a $1.05 million equipment lease claim.

UniTek Interposed LP owns 24.2% of the company’s voting securities, David Sandberg owns 10.5%, John Randall Waterfield owns 9.3%, Cetus Capital II, LLC owns 5.9%, and Steven B. Klinsky owns 5.3%.

The company is represented by Young, Conaway, Stargatt & Taylor, LLP.

UniTek is a Blue Bell, Pa.-based provider of engineering, construction management and installation fulfillment services to the telecommunications, broadband cable and satellite industries. The Chapter 11 case number is 14-12471.

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