Wed 11/17/2021 16:11 PM
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Relevant Documents:
Voluntary Petition
Press Release
First Day Declaration
Cash Collateral Motion
Disclosure Statement / RSA
Voting Tabulation
Scheduling Motion
Agenda / Notice of Hearing

Riverbed Technology Inc., a San Francisco-based provider of IT optimization products and services, and three affiliates filed petitions late Tuesday evening, Nov. 16, commencing chapter 11 proceedings in the Bankruptcy Court for the District of Delaware. According to the first day declaration filed by the debtors’ CEO, Dan Smoot, the proposed restructuring plan would eliminate approximately $1.1 billion of Riverbed’s existing funded debt, provide Riverbed with $100 million of new equity capital and pay all trade, vendor and employee obligations in full.

First lien lenders would receive a combination of new preferred stock and a $900 million exit facility; second lien lenders would receive 100% of reorganized equity, subject to dilution. Holders of preferred equity (including ad hoc group members providing the $100 million in new money and first lien lenders receiving preferred equity on account of their prepetition holdings) would control 52.4% of the company’s stock on a fully diluted basis.

Once the restructuring transactions are complete, the ad hoc group (which is made up entirely of institutional investors, including Apollo, would “become the majority owners of Riverbed through their managed funds,” according to a press release issued by the debtors.

The debtors have filed their proposed plan and disclosure statement, and through the scheduling motion they request a combined DS and confirmation hearing be held on Dec. 2, and they say they intend to emerge from chapter 11 shortly thereafter.

The first day hearing has been scheduled for tomorrow, Thursday, Nov. 18, at 11 a.m. ET.

The proposed confirmation schedule is as follows:

  • Nov. 23 at 5 p.m. ET: Objection and general opt-out deadlines;

  • Nov. 30 at 12 p.m. ET: Deadline to file confirmation brief and hearing agenda;

  • Dec. 2 (subject to court availability): Combined hearing to consider adequacy of the disclosure statement and plan confirmation; and

  • 32 calendar days following date of service: Supplemental opt-out deadline.

  • Dec. 3: Deadline to consummate a plan under the RSA (which has Dec. 31 and Jan 31, 2022, outside dates for termination, depending on certain conditions).

The debtors ask, conditional upon the plan being confirmed within 75 days of the petition date, that the court direct the U.S.Trustee to not convene a meeting of creditors and for a waiver of the requirement to file statements of financial affairs and schedules of assets and liabilities.

According to the voting declaration, the plan was accepted by 100% of creditors in all classes entitled to vote as follows:

The plan is based on a restructuring support agreement entered into on Oct. 13 with the company’s equity sponsors and an ad hoc group of lenders holding a supermajority of its funded secured debt. The RSA is supported by holders of 100% of bridge notes, approximately 67.4% of first lien loan claims, 84% of second lien loan claims and 77% of holders of equity interests in the debtors’ parent. On Oct. 22, the debtors launched a dual solicitation process: simultaneously soliciting consent to an out-of-court exchange and the bankruptcy plan. Both transactions were supported by the RSA parties, but the debtors elected to pursue a chapter 11 process to obtain tax efficiencies, to resolve “potential legacy equity holder issues” and to obtain other benefits available under the Bankruptcy Code.

The debtors say they expect to fund their operations while in bankruptcy with cash collateral and the remaining proceeds from a $65 million bridge financing provided by the ad hoc group of lenders on Oct. 13 in the form of new first lien secured notes. At exit, commitment parties, including Apollo, Invesco, Diameter, Angel Island, Nuveen, Eaton Vance and Thoma Bravo, would fund $100 million in new convertible Series A preferred stock, a part of the proceeds of which would be used to pay, in full, the bridge loan. In total, the preferred stock would have a liquidation preference of $354 million at exit, $239 million of which would be distributed to first lien lenders, and the remaining $115 million would be distributed to new-money investors inclusive of a commitment fee (variable depending on the election of the commitment party). The preferred stock would be convertible into 52.4% of common equity.

“Series A Preferred shall vote together with the New Common Equity on an as-if converted basis, and not as a separate class, on all matters submitted to a vote of members, including without limitation, the election of directors,” according to an RSA term sheet. The new board makeup will be disclosed in a plan supplement.

In addition to receiving their share of the reorganized preferred equity, first lien lenders would receive their share of a new $900 million exit first lien term loan and a cash paydown of accrued interest. Second lien claimholders would receive their share of 100% of reorganized common equity, subject to dilution from the convertible preferred and a management incentive plan for up to 8% of reorganized equity. Prepetition common equity would be canceled. As noted above, Thoma Bravo, which owns 77% of prepetition equity, is a new-money investor.

The company’s prepetition capital structure includes the following:

The bridge notes and the first lien loan are guaranteed by debtors Riverbed Holdings Inc. and Aternity and secured on a pari first-priority basis by substantially all of the debtors’ assets. Additionally, the bridge notes are secured and guaranteed by nondebtor Riverbed Technology Pte. Ltd.’s assets.

The first lien credit agreement was amended to extend the maturity of “most” of the first lien loans from April 24, 2022, to Dec. 31, 2025.

The second lien facility was entered into on Dec. 31, 2020, after an exchange of existing unsecured notes into the new second lien notes. Riverbed Technology is the borrower under the second lien facility, which is guaranteed by debtors Riverbed Holdings Inc. and Aternity and secured on a second-priority basis by substantially all of the debtors’ assets. After the exchange, approximately $9.5 million of unsecured notes remain outstanding.

The debtors are represented by Kirkland & Ellis and Pachulski Stang Ziehl & Jones as legal co-counsel, AlixPartners as restructuring advisor and GLC Advisors & Co. as investment banker. Stretto is the claims agent. The ad hoc group’s advisors include White & Case as legal counsel and Centerview Partners as financial advisor. Davis Polk & Wardwell is acting as counsel to certain members of the ad hoc group.

The case has been assigned to Judge Craig T. Goldblatt (case No. 21-11503).

The docket can be found HERE.

Events Leading to the Bankruptcy Filing / Prepetition Restructuring Efforts

Riverbed says it faced significant headwinds in 2020 related to the Covid-19 pandemic, including global supply-chain disruptions and labor shortages. These factors, combined with substantial debt service obligations, constrained Riverbed’s liquidity. “Compounding these challenges,” ​​one of Riverbed’s key markets - the wide area network optimization market - has undergone a “general decline” in recent years as part of a transition by organizations to alternative location-independent computing technologies.

To de-stress the business and address significant looming funded debt maturities, Riverbed executed a voluntary amend-and-extend and debt-for-debt exchange transaction in December 2020. Through the 2020 refinancing, the company: (i) extended the maturity of most of its first lien term loan debt from April 2022 to December 2025 and (ii) refinanced nearly all of its then-outstanding unsecured notes (due in 2023) with second lien term loans maturing in December 2026. Further, in April 2021, Riverbed entered into a $35 million asset-based revolving credit facility, upsized to $50 million in May 2021, enabling Riverbed to meet its near-term liquidity needs.

Riverbed’s persistently challenging liquidity position pushed the company to explore strategic alternatives in mid-2021. In the following months, Riverbed engaged in discussions regarding a comprehensive balance sheet solution with certain of its key stakeholders, including an ad hoc group of first lien lenders and second lien lenders, an ad hoc subgroup of first lien lenders and Riverbed’s equity sponsors.

After extensive negotiations, Riverbed and these key stakeholders reached agreement on the comprehensive deleveraging and liquidity-enhancing transactions set forth in the RSA, and the ad hoc group extended $65 million in bridge financing in the form of new first lien secured notes in order to facilitate the terms of the restructuring. Riverbed utilized this financing to fully repay its ABL facility and will use remaining amounts, as well as cash collateral, to continue operations and fund the chapter 11 proceedings until the completion of the restructuring.


The debtors describe Riverbed as a leading provider of IT optimization products and services, including a suite of “best-in-class” network and application visibility, management and performance-enhancement products and services to “many of the world’s largest organizations.” Founded in 2002 with the objective of enabling location-independent computing, the San Francisco-based company employs a global workforce of more than 1,400 employees and has sold its offerings to more than 30,000 customers worldwide, “including 99% of the Fortune 100,” to date. Riverbed maintains more than 7,500 active customer contracts.

After its deployment of SteelHead, a suite of wide area network, or WAN, optimization tools built on proprietary software in in 2004, Riverbed expanded into offerings that enable organizations to visualize, optimize, remediate and accelerate the performance of any network for any application, while also supporting business objectives to mitigate cybersecurity risk.

Riverbed completed an initial public offering in 2006 and remained a public company until 2015, when it was acquired by plan sponsors Thoma Bravo LP, a leading technology-focused private equity investment firm, and Teachers’ Private Capital, the private equity arm of Ontario Teachers’ Pension Plan.

In the following year, Riverbed acquired Aternity, a “world-class” digital experience management, or DEM, provider whose offerings enable organizations to collect data directly from end-user devices and to measure and analyze their users’ digital experience.

Riverbed says it has substantial operations outside of the United States and expects that its operations outside of the United States will continue in the ordinary course of business during these chapter 11 cases. All of Riverbed’s international entities are nondebtor affiliates, and the bridge notes are Riverbed’s only funded indebtedness outside of the United States (guaranteed by nondebtor Riverbed Technology Pte. Ltd (Singapore)). The holders of the bridge notes claims have agreed to forbear from exercising remedies under the bridge notes in connection with the RSA.

The chart below provides a simplified summary of Riverbed’s corporate organizational structure:

A more comprehensive summary of the Riverbed corporate organizational structure can be found HERE.

The debtors' largest unsecured creditors are listed below:


10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
US Bank National Association Nashville Unsecured
$    9,633,892
Jabil Circuit Hungary Ltd Tiszaújváros,
Trade 2,497,517
Tibco Software Inc. Palo Alto, Calif. Trade 486,585
Amazon Web Services Seattle Trade 477,688
Microsoft Corporation Dallas Trade 419,212
UPS Supply Chain Solutions Inc. Chicago Trade 306,186
Digital Realty Trust Boston Trade 295,000
Auctioniq LLC Cotton Heights, Utah Trade 268,324
International Business Machine Dallas Trade 264,202
Jabil Circuit Inc. Memphis Trade 245,901

The case representatives are as follows:


Role Name Firm Location
Debtors' Co-Counsel Patrick J. Nash, Jr. Kirkland
& Ellis
Christopher S. Koenig
Christine A. Okike New York
Debtors' Co-Counsel Laura Davis Jones Pachulski
Stang Ziehl
Wilmington, Del.
Timothy P. Cairns
Debtors' Restructuring
NA AlixPartners NA
Debtors' Investment
Counsel to the Ad
Hoc Group
Thomas E Lauria White
& Case
Andrew Zatz New York
Andrea Amulic
Financial Advisor to
the Ad Hoc Group
NA Centerview
Financial Advisor to
the Ad Hoc Group
NA Ernst &
Co-Counsel to the
Ad Hoc First Lien
Damian S. Schaible Davis Polk
& Wardwell
New York
Jon Finelli
Stephanie Massman
Co-Counsel to the
Ad Hoc First Lien Subgroup
Daniel J. DeFranceschi Richards, Layton & Finger Wilmington, Del.
Kevin Gross
David T. Queroli
Counsel to the First
Lien Agent
NA Latham &
Counsel to the
Second Lien Agent
NA Norton Rose
Counsel to the
Bridge Notes Agent
NA Seward
& Kissel
Debtors' Claims Agent Sheryl Betance Stretto Irvine, Calif.


Plan / Disclosure Statement

Below is a chart of the plan’s classes, along with their impairment status and voting rights.

Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:

  • Class 1 - Other secured claims: Each holder of such claim would receive at the debtors’ option (in consultation with the ad hoc group), either: (i) payment in full in cash, (ii) the collateral securing its claim, (iii) reinstatement or (iv) such other treatment rendering such claim unimpaired under section 1124 of the Bankruptcy Code.

    • Projected amount of claims: 0. Estimated recovery: 100%.

  • Class 2 - Other priority claims: Each holder of such claim would receive treatment rendering such claim unimpaired under section 1124 of the Bankruptcy Code.

    • Projected amount of claims: $500,000. Estimated recovery: 100%.

  • Class 3 - Bridge notes claims: Each holder of such claim would receive payment in full in cash of its allowed claim. The allowed amount of the claim may be increased pursuant to the terms of the bridge agreement and the RSA, and amounts constituting “transaction expenses” of the ad hoc group would also be paid.

    • Projected amount of claims: $65.66 million. Estimated recovery: 100%.

  • Class 4 - First lien secured claims: Each holder of such claim would receive: (i) payment in full in cash of accrued and unpaid interest, (ii) its pro rata share of the exit facility term loans and (iii) convertible preferred equity with a liquidation preference of approximately $239 million (with the initial liquidation preference equal to the principal amount of the first lien loan held less the principal amount of exit facility loan received). Amounts constituting “transaction expenses” of the ad hoc group would also be paid.

    • Projected amount of claims: $1.146 billion. Estimated recovery: 100%.

  • Class 5 - Second lien secured claims: Each holder of such claim would receive its pro rata share of 100% of new common equity (subject to dilution by conversion of the convertible preferred equity and the management incentive plan).

    • Projected amount of claims: $799.1 million. Estimated recovery: 40%.

  • Class 6 - Unsecured notes claims: Each holder of such claim would have its interest canceled without any distribution.

    • Projected amount of claims: $9.6 million. Estimated recovery: 0%.

  • Class 7 - General unsecured claims: Each holder of such claim would have its interest reinstated.

    • Projected amount of claims: $12 million. Estimated recovery: 100%.

  • Class 8 - Intercompany claims: Each holder of such claim would have its claim, at the applicable debtor’s option (subject to acceptability by the required lenders), either: (i) reinstated or (ii) otherwise converted to equity, set off, settled, distributed, contributed, canceled or released.

    • Projected amount of claims: N/A. Estimated recovery: 0%-100%.

  • Class 9 - Intercompany interests: Each holder of such interest would have its interest, at the applicable debtor’s option (subject to acceptability by the required lenders), either: (i) reinstated or (ii) otherwise converted to equity, set off, settled, distributed, contributed, canceled or released.

    • Projected amount of claims: N/A. Estimated recovery: 0%-100%.

  • Class 10 - Existing interests: All existing interests would be canceled, released or extinguished without any distribution.

    • Projected amount of claims: N/A. Estimated recovery: 0%.

  • Class 11 - Section 510(b) claims: All 510(b) claims would be canceled, released or extinguished without any distribution.

    • Projected amount of claims: N/A. Estimated recovery: 0%.

Management Incentive Plan

The MIP contemplates a reservation of 8% of new common equity, with half of that amount, divided equally between restricted stock units and stock options, to be allocated within 90 days of the effective date of the plan and the remaining 4% to be allocated after the effective date, as determined by the board of reorganized Riverbed. The new board would also issue additional options pursuant to an employee incentive plan.

Exit Facility

According to a term sheet attached to the RSA, the $900 million exit term loan given to prepetition first lien lenders would mature in five years. Interest on the loan would accrue at L+8% with a 1% LIBOR floor; 6% of the spread would be paid in cash and 2% PIK.

The term sheet provides a side-by-side comparison of terms and covenants between the prepetition first lien term loan and the exit facility.

Series A Convertible Preferred

The preferred securities will be convertible into 52.4% of fully diluted (including from the MIP) reorganized common stock immediately following the closing date. The preferred would accrue dividends at a rate of 6.5% a year, of which 1.5% would be payable in cash and 5% accrued.

The preferred would have an initial liquidation preference of $354 million, consisting of $239 million provided to the first lien lenders as recovery under the plan and the remaining amount given to the new-money investors as part of their $100 million commitment plus 16.667% fee payable in additional convertible preferred equity.

Regarding the $100 million new-money investment, each commitment party would receive a commitment fee, which, at the election of the party, will be either its pro rata share of (i) 16.667% of additional preferred, or (ii) a contingent value right equal to 10% of the amount of the purchase price for a sale of the company’s equity or substantially all of its assets remaining after $2.5 billion value has been distributed to all senior stakeholders and holders of new common equity if such sale occurs within five years of the closing date.

The commitment parties are below:

As noted above, the Series A preferreds will vote with common equity on an as-if converted basis.

Financial Projections

The debtors project total revenue will increase to $758 million in 2025 from $595 million in 2021, while adjusted EBITDA margins are expected to increase to 29.7% from 25.5%. Although free cash flow is projected to be negative $161 million in 2021, driven by restructuring costs and cash interest, the company projects cash flow will turn positive in 2022 and increase to $128 million in 2025.


The debtors’ plan and disclosure statement do not include a valuation analysis, but the company does disclose that on the basis of the new-money investment, the reorganized debtors’ imputed equity value at
emergence is approximately $675 million, if the convertible preferred equity is converted, and $321.5 million pre-conversion. The debtors’ implied enterprise value is approximately $1.46 billion based on the $900 million of anticipated exit debt and $120 million of unrestricted cash projected at year-end.

Liquidation Analysis

The debtors’ liquidation analysis is shown below:

Cash Collateral Motion

The debtors say that they require immediate access to liquidity to ensure continued operations through the chapter 11 cases to preserve the value of their estates and pursue plan confirmation. Without access to cash collateral, the debtors say they will be unable to operate in the ordinary course of business and would suffer immediate and irreparable harm to the value of the debtors’ estates, to the detriment of all stakeholders. The debtors request entry of an interim order approving the consensual use of cash collateral on terms negotiated with the prepetition secured parties, including the prepetition first lien agent and lenders, the prepetition bridge notes agents and purchasers, and the prepetition second lien agent and lenders.

The cash collateral would be used for working capital, general corporate purposes, administrative costs and expenses incurred in the chapter 11 cases, and to provide adequate protection payments to the prepetition first lien and prepetition bridge notes secured parties. The complete adequate protection package would include, for all prepetition secured parties, (i) replacement liens, which would attach to the proceeds of avoidance actions upon entry of the final cash collateral order; (ii) payment of professional fees; (iii) financial reporting; and (iv) collateral monitoring. In addition, the prepetition first lien secured parties and the prepetition bridge notes secured parties would receive (i) superpriority claims with full recourse to all adequate protection collateral, including avoidance action proceeds, and (ii) cash payments in an amount equal to all prepetition and postpetition accrued and unpaid interest at the nondefault rate.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).

The lien challenge deadline is the earlier of 75 days from entry of the interim order and the date of entry of the plan confirmation order. The UCC lien investigation budget is $50,000.

The carve-out for professional fees is $1.5 million.

A 13-week budget, showing $23.1 million of cash as of the petition date, for the proposed use of cash collateral is HERE.

Other Motions

The debtors also filed various standard first day motions, including the following:

  • Motion for joint administration

    • The cases will be jointly administered under case No. 21-11503.

  • Motion to establish trading procedures

    • Riverbed seeks to establish trading procedures for its common and preferred stock, to be able to object to and prevent transfers if necessary to preserve net operating losses and other tax attributes. The debtors have about $41.3 million in federal NOLs and $177 million of interest expense carryforwards.

  • Motion to pay employee wages and benefits

    • The debtors request approval to pay approximately $2 million in unpaid wage/pay obligations, to honor $5.8 million in withholding obligations, to pay $33,000 in payroll processing service obligations, to honor $420,000 in reimbursable expense obligations, to honor $1.9 million in unpaid health and welfare coverage and benefits, to pay about $50,000 on account of workers’ compensation programs, to pay $11,000 on account of 401(k) matching contributions, and to pay $80,000 with respect to paid leave benefits.

  • Motion to use cash management system

    • The company has bank accounts with Wells Fargo Bank NA and Citibank NA.

  • Motion to maintain insurance programs and surety coverage

  • Motion to pay taxes and fees

    • The debtors’ tax obligations are summarized as follows:


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