Riverbed Technologies files for Chapter 11 bankruptcy protection following pandemic 'headwinds'

Closure of factories, labour shortages, and continued slowdown in network optimisation sales at fault

Riverbed Technology has filed for Chapter 11 bankruptcy protection with a view to implementing a "prepackaged" financial restructuring plan to eliminate debts of $1.1bn following struggles caused by the pandemic.

The SD-WAN and WAN optimisation biz first signalled intent to enter into a Restructuring Support Agreement last month, which it said is fully supported by all its voting lenders, as well as private equity majority owners, Thoma Bravo LLP and Ontario Teachers' Pension Plan (OTPP).

In court papers [PDF] lodged with the US Bankruptcy Court for the District of Delaware, Riverbed president and CEO Dan Smoot said the "best option" is to "right-size its capital structure and position itself for long-term success."

"Like many similar businesses, Riverbed faced significant COVID-19 related headwinds in 2020, including global supply chain disruptions and labor shortages, which adversely affected Riverbed's financial performance," said Smoot in supporting document [PDF]. "With factories shut down and stay-at-home orders instituted across the globe, Riverbed faced challenges maintaining its global supply chain as well as driving sales through a suddenly fully remote salesforce."

The limitations caused by the pandemic and debt obligations – it was bought by Thoma Bravo and OTPP at the end of 2014 for around $3.6bn – "significantly constrained liquidity through 2020," the CEO added.

"Compounding these challenges, one of Riverbed's key markets – the wide area network optimization market – has experienced a general decline in recent years as part of a transition by organizations to alternative location-independent computing technologies."

The business, which employs 1,400 staff and sells to more than 30,000 customers, said the "sustained decrease in workforce participation and declined demand during the pandemic for Riverbed's products and services" kept the pressure on liquidity, leading to the exploration of efforts to reduce its debts to its owners.

"After extensive, arm's length negotiations, Riverbed and these key stakeholders (First and Second Lien lenders and equity sponsors) reached agreement on the comprehensive deleveraging and liquidity enhancing transactions set forth in the structuring support agreement."

Riverbed will halve its $2bn debt through the financial restructuring, according to reports. Debt equity control will be passed to junior lenders and senior loan notes will be converted into new debts and preferred equity, the court filing states.

The financial arrangement will provide Riverbed with an additional $35m "cash infusion." General unsecured claims – including trade, vendor, and employee claims – will be "unimpaired and reinstated," the court papers say.

In a press statement, Smoot said:

After thoroughly evaluating the different mechanisms through which to implement the recapitalization, our analysis made it clear that Riverbed could achieve a cleaner, more financially beneficial outcome by utilizing the court-supervised process, setting our company up for even greater growth and innovation opportunities in the future.

Apollo Partner Chris Lahoud said: "We are pleased to continue our long-term support of Riverbed in this next chapter as they strengthen their financial position to deliver leading performance and visibility solutions to companies around the world.

"Riverbed has an exceptional team and strong market opportunities, and we are confident in their strategy to deliver innovative customer solutions and long-term profitable growth." ®

Other stories you might like

  • GPL legal battle: Vizio told by judge it will have to answer breach-of-contract claims
    Fine-print crucially deemed contractual agreement as well as copyright license in smartTV source-code case

    The Software Freedom Conservancy (SFC) has won a significant legal victory in its ongoing effort to force Vizio to publish the source code of its SmartCast TV software, which is said to contain GPLv2 and LGPLv2.1 copyleft-licensed components.

    SFC sued Vizio, claiming it was in breach of contract by failing to obey the terms of the GPLv2 and LGPLv2.1 licenses that require source code to be made public when certain conditions are met, and sought declaratory relief on behalf of Vizio TV owners. SFC wanted its breach-of-contract arguments to be heard by the Orange County Superior Court in California, though Vizio kicked the matter up to the district court level in central California where it hoped to avoid the contract issue and defend its corner using just federal copyright law.

    On Friday, Federal District Judge Josephine Staton sided with SFC and granted its motion to send its lawsuit back to superior court. To do so, Judge Staton had to decide whether or not the federal Copyright Act preempted the SFC's breach-of-contract allegations; in the end, she decided it didn't.

    Continue reading
  • US brings first-of-its-kind criminal charges of Bitcoin-based sanctions-busting
    Citizen allegedly moved $10m-plus in BTC into banned nation

    US prosecutors have accused an American citizen of illegally funneling more than $10 million in Bitcoin into an economically sanctioned country.

    It's said the resulting criminal charges of sanctions busting through the use of cryptocurrency are the first of their kind to be brought in the US.

    Under the United States' International Emergency Economic Powers Act (IEEA), it is illegal for a citizen or institution within the US to transfer funds, directly or indirectly, to a sanctioned country, such as Iran, Cuba, North Korea, or Russia. If there is evidence the IEEA was willfully violated, a criminal case should follow. If an individual or financial exchange was unwittingly involved in evading sanctions, they may be subject to civil action. 

    Continue reading
  • Meta hires network chip guru from Intel: What does this mean for future silicon?
    Why be a customer when you can develop your own custom semiconductors

    Analysis Here's something that should raise eyebrows in the datacenter world: Facebook parent company Meta has hired a veteran networking chip engineer from Intel to lead silicon design efforts in the internet giant's infrastructure hardware engineering group.

    Jon Dama started as director of silicon in May for Meta's infrastructure hardware group, a role that has him "responsible for several design teams innovating the datacenter for scale," according to his LinkedIn profile. In a blurb, Dama indicated that a team is already in place at Meta, and he hopes to "scale the next several doublings of data processing" with them.

    Though we couldn't confirm it, we think it's likely that Dama is reporting to Alexis Bjorlin, Meta's vice president of infrastructure hardware who previously worked with Dama when she was general manager of Intel's Connectivity group before serving a two-year stint at Broadcom.

    Continue reading

Biting the hand that feeds IT © 1998–2022