{"id":90612,"date":"2019-04-08T20:48:17","date_gmt":"2019-04-09T00:48:17","guid":{"rendered":"http:\/\/rbach.net\/blog\/index.php\/"},"modified":"2022-11-18T08:32:45","modified_gmt":"2022-11-18T13:32:45","slug":"chapter-11-reboot-for-sungard-as","status":"publish","type":"post","link":"https:\/\/rbach.net\/index.php\/chapter-11-reboot-for-sungard-as\/","title":{"rendered":"Chapter 11 Reboot for Sungard AS"},"content":{"rendered":"

Updated 11\/18\/2022<\/strong> –\u00a0 11:11 Systems<\/a> has completed the acquisition<\/a> of Sungard<\/strong> Availability Services\u2019\u00a0 Recovery Services and Sungard AS\u2019 Cloud and Managed Services business’.<\/p>\n

—<\/p>\n

Updated 05\/08\/2019<\/strong> – Sungard AS emerged from bankruptcy<\/strong> on 05\/07\/2019. The firm’s turnaround is described<\/a> as the fastest pre-negotiated restructuring<\/strong> in US corporate history. The result is Sungard AS debtors having taken an $800 million haircut, <\/strong>the recovery service received $100 million of new liquidity<\/strong> from its creditors and a new CEO<\/strong>.<\/p>\n

The firm’s new ownership and largest shareholders now include Angelo, Gordon & Co., LP<\/a>; The Carlyle Group Global Credit<\/a>; FS Investments<\/a> and GSO Capital Partners LP<\/a>.<\/p>\n

However, the quick fix did not solve the problems that forced the firm into bankruptcy, as described below.<\/p>\n

—<\/p>\n

Data infrastructure and disaster recovery company Sungard Availability Services<\/strong><\/a> (AS) announced<\/a> it was filing for bankruptcy<\/strong> on April 01, 2019. Sungard AS, which helped keep Wall Street running through 9\/11<\/a>, says its customers include 70 percent of Fortune 100 companies. It boasts 90 hardened IT facilities connected by a redundant, dedicated network backbone, along with 18 mobile facilities staged in strategic locations is saddled with hefty debt from its private equity backers<\/strong>.<\/p>\n

\"Sungard<\/a>In addition to a huge debt load, the once high-flying Pennsylvania-based firm faces falling margins<\/strong> as it struggles with growing competition from cloud rivals<\/strong> amid a shift away from on-premises\/co-location backup. These factors forced the firm to seek relief from the courts.<\/p>\n

The Sungard AS Chapter 11 plan is expected<\/a> to be filed in New York during May 2019. The bankruptcy plan reportedly<\/a> includes a write-off $800 million<\/strong> of the company\u2019s $1.25 billion debt. Chapter 11 protection<\/a> is a part of the US Bankruptcy Code that allows a company to reorganize its assets while handing over the business operations of the company to its debtors.<\/p>\n

\"Sungard<\/a><\/p>\n

Under the Chapter 11 proposal, hedge fund<\/strong> creditors that specialize in turnarounds and liquidations, sometimes dubbed \u201cvulture capitalists<\/a>\u201d \u2014 including Blackstone Group\u2019s LP\u2019s GSO debt investment unit<\/a>, Angelo Gordon & Co<\/a>., Carlisle Group<\/a>, and Contrarian Capital Management<\/a> \u2014 will take control of Sungard Availability.<\/strong><\/p>\n

The hedge fund<\/a> will replace the buyout investors who bought the formerly publicly traded company for $11.4 billion in 2005. The original private equity<\/strong> sponsors include: — Bain Capital<\/a>, Blackstone Group<\/a>, Providence Equity Partners<\/a>, KKR & Co<\/a>., Silver Lake Management<\/a>, and Texas Pacific Group (TPG) Capital<\/a>.<\/p>\n

\"Wall<\/a>Despite claims that most creditors back the bankruptcy plan and that Sungard AS would emerge from the wreckage a stronger, more competitive business, the move rocked the industry. Hedge funds are not typically long-term investors causing alarm among SunGard AS employees<\/strong> about the company\u2019s future. Employees fear the company will be asset-stripped and not survive, as hedge funds seek to recoup money lost on the debt haircut<\/strong>. Sungard AS insists that won\u2019t happen. Sungard employs over 3,000 people according to its website.<\/p>\n

Sungard AS\u2019s data center model, \u201cshared infrastructure,\u201d of physical locations for backup IT systems, has become outdated as cloud-based infrastructure, led by Amazon Web Services<\/a><\/strong>, and Microsoft Azure<\/a><\/strong> have grown to dominate firms’ IT backup operations.<\/p>\n

Andrew A. Stern, Chief Executive Officer, Sungard Availability Services said<\/a>.<\/p>\n

There\u2019s no question the shift to cloud is part of what\u2019s challenged us. But even before the cloud, by the late 2000s, \u201cthe approach the company had taken to disaster recovery really hadn\u2019t changed in 20 years \u2014 and the world had moved on. \u2026 We had been slow in recognizing the business had to change.<\/em><\/p>\n

\"Data<\/a>Sungard initially tried to meet rival remote-server \u201ccloud\u201d-based systems with its own \u201cprivate cloud\u201d solutions. But its large corporate clients by 2016 were migrating to the large, secure cloud systems maintained by Amazon, Microsoft, and other giant companies. CEO Stern added, \u201cWe suddenly found ourselves competing with much bigger environments at much greater scale.<\/em>\u201d<\/p>\n

Sungard couldn\u2019t beat them, so it signed up as one of 130 Amazon-audited managed service partners<\/a>, recruiting and customizing Amazon Web Services for corporate disaster-recovery customers, including, most recently, government agencies in England. Mr. Stern added, \u201cBut that change has taken time.<\/em>\u201d<\/p>\n

<\/a>Philly.com<\/a> summarizes<\/a> Sungard\u2019s history. Sungard\u2019s lineage starts in the mainframe<\/a> days. It started off as Sun Information Systems<\/strong>, founded in the 1970s as a backup for early data systems at oil and chemical plants<\/strong> run by the former Sun Oil Co<\/a><\/strong>. In the 1980s, founder John Ryan diversified the company, offering backup services to banks<\/strong> as they computerized deposit, loan, and investment records. In the tech boom of the late 1990s, publicly-traded SunGard Data Systems was worth more than Sun Oil\u2019s parent company, Sunoco.<\/p>\n

During this time SunGard Data acquired competing systems in the same market sector and let them continue competing for a time. In the late 1990s then-chief executive, Cristobal Conde began combining SunGard products into large groups focusing on recovery (Availability) and was using its profits to buy dozens of financial, government, and college software services across Europe and Asia, and North America.<\/p>\n

The 2005 acquisition of SunGard Data by the buyout firms was one of the biggest deals of its kind before the 2008 financial crisis<\/a>. In 2011 sales peaked at over $5 billion and employment topped 20,000.<\/p>\n

\"Mainframe<\/a>But with its owners mostly concerned with pulling cash out of the company, it lost what its leaders admitted was a \u201ctsunami\u201d of corporate customer cancellations as the disaster-recovery market changed, and the company didn\u2019t keep up. In 2011, SunGard Data sold its main college business<\/a> to Virginia-based Ellucian for $1.75 billion.<\/p>\n

In 2014 SunGard Data split in two<\/a>. In 2015 the larger SunGard Data Systems Inc.<\/strong>, with sales of $2.8 billion was sold<\/strong> for $5.1 billion<\/a> to Florida-based Fidelity Information Services<\/a>. As a standalone unit, Sungard AS struggled to gain profitability leading to the bankruptcy announcement.<\/p>\n

rb-<\/em><\/strong><\/p>\n

Indeed the Cloud has significantly changed disaster recovery in multiple ways.<\/em><\/p>\n

The hyperscale cloud providers like AWS and Microsoft Azure have entered the market as both competitors and partners.<\/em><\/p>\n

Cloud disaster recovery has changed the way disaster recovery services are delivered adding flexibility and remote working.<\/em><\/p>\n

We have seen the same thing with the demise of KMart and Sears. Sungard was still reliant on brick-and-mortar DR services.<\/em><\/p>\n

Let’s see how many Sungard AS customers will continue to invest the DR dollars into a company whose CEO admits they \u201chadn\u2019t changed in 20 years\u201d and is willing to write off almost a billion dollars.<\/em><\/p>\n

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