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Fresh-Start Reporting (Tables) - SOFTWARE LUXEMBOURG HOLDING S.A. (SUCCESSOR) AND POINTWELL LIMITED (PREDECESSOR) | 5 Months Ended
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Jan. 31, 2021
Summary of fair value of the Successor Company's equity as of the Effective Date | The following table reconciles the enterprise value per the Disclosure Statement to the fair value of the Successor Company’s equity, as of the Effective Date (in thousands, except per share amounts):
Enterprise value(1) |  | $ | 1,150,000
Plus: Cash |  |  | 92,009
Less: Borrowings under accounts receivable facility |  |  | (48,886)
Less: Fair value of debt |  |  | (514,950)
Less: Fair value of warrants |  |  | (11,200)
Implied value of Successor Company common stock |  | $ | 666,973
Shares issued upon emergence (Class A and B common stock) |  |  | 4,000
Per share |  | $ | 167
Summary of reconciliation of the Company's enterprise value to reorganization value as of the Effective Date | The reconciliation of the Company’s enterprise value to reorganization value as of the Effective Date is as follows (in thousands):
Enterprise value(1) |  | $ | 1,150,000
Plus: |  |  |
Cash |  |  | 92,009
Current liabilities (excluding AR facility and Current maturity of long-term debt) |  |  | 134,257
Deferred tax liabilities |  |  | 103,930
Other long-term liabilities |  |  | 7,140
Non-current lease obligations |  |  | 16,399
Reorganization value |  | $ | 1,503,735
| (1) |  | Enterprise value includes the value of warrants that are classified as a liability.
Summary of adjustments set forth in the consolidated balance sheet |
|  |  |  |  | Reorganization |  | Fresh-Start |  |  |
|  | Predecessor |  | Adjustments |  | Adjustments |  | Successor
Assets |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 42,341 |  | $ | 49,668 | (1) | $ | — |  | $ | 92,009
Restricted cash |  |  | 35,306 |  |  | (25,000) | (1) |  | — |  |  | 10,306
Accounts receivable |  |  | 73,607 |  |  | 1,700 | (2) |  | (990) | (10) |  | 74,317
Prepaid expense and other current assets |  |  | 39,317 |  |  | (300) | (2) |  | (10,573) | (11) |  | 28,444
Total current assets |  |  | 190,571 |  |  | 26,068 |  |  | (11,563) |  |  | 205,076
Property and equipment, net |  |  | 15,523 |  |  | 500 | (2) |  | — |  |  | 16,023
Goodwill |  |  | 1,070,674 |  |  | 5,100 | (2) |  | (580,639) | (12) |  | 495,135
Intangible asset, net |  |  | 249,962 |  |  | — |  |  | 516,124 | (13) |  | 766,086
Right-of-use assets |  |  | 17,454 |  |  | — |  |  | 367 | (14) |  | 17,821
Other assets |  |  | 17,313 |  |  | (3,500) | (2) |  | (10,219) | (11) |  | 3,594
Total assets |  | $ | 1,561,497 |  | $ | 28,168 |  | $ | (85,930) |  | $ | 1,503,735
Liabilities and shareholders’ (deficit) equity |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Current maturity of long-term debt |  | $ | 60,000 |  | $ | (57,400) | (3) | $ | — |  | $ | 2,600
Borrowings under accounts receivable facility |  |  | 48,886 |  |  | — |  |  | — |  |  | 48,886
Accounts payable |  |  | 7,851 |  |  | 300 | (2) |  | — |  |  | 8,151
Accrued compensation |  |  | 23,587 |  |  | 1,400 | (2) |  | — |  |  | 24,987
Accrued expenses and other liabilities |  |  | 12,105 |  |  | 500 | (2) |  | — |  |  | 12,605
Lease liabilities |  |  | 1,699 |  |  | 3,245 | (6) |  | (175) | (14) |  | 4,769
Deferred revenue |  |  | 196,469 |  |  | 2,400 | (2) |  | (115,124) | (15) |  | 83,745
Total current liabilities |  |  | 350,597 |  |  | (49,555) |  |  | (115,299) |  |  | 185,743
Long-term debt |  |  | — |  |  | 517,400 | (3)(4) |  | (5,050) | (17) |  | 512,350
Long term lease liabilities |  |  | 3,732 |  |  | 12,442 | (6) |  | 225 | (14) |  | 16,399
Warrants |  |  | — |  |  | 11,200 | (6)(8) |  | — |  |  | 11,200
Deferred tax liabilities |  |  | — |  |  | 30,484 | (5)(6) |  | 73,446 | (16) |  | 103,930
Deferred revenue – non-current |  |  | 1,783 |  |  | — |  |  | (1,128) | (15) |  | 655
Other long-term liabilities |  |  | 2,289 |  |  | 3,796 | (6) |  | 400 | (17) |  | 6,485
Total long-term liabilities |  |  | 7,804 |  |  | 575,322 |  |  | 67,893 |  |  | 651,019
Liabilities subject to compromise |  |  | 4,472,954 |  |  | (4,472,954) | (6) |  | — |  |  | —
Total liabilities |  |  | 4,831,355 |  |  | (3,947,187) |  |  | (47,406) |  |  | 836,762
Shareholders’ (deficit) equity: |  |  |  |  |  |  |  |  |  |  |  |
Ordinary shares (Predecessor) |  |  | 138 |  |  | (138) | (7) |  | — |  |  | —
Additional paid in capital (Predecessor) |  |  | 83 |  |  | (83) | (7) |  | — |  |  | —
Ordinary shares (Successor) |  |  | — |  |  | 40 | (6)(8) |  | — |  |  | 40
Additional paid in capital (Successor) |  |  | — |  |  | 666,933 | (6)(8) |  | — |  |  | 666,933
(Accumulated deficit) retained earnings |  |  | (3,267,346) |  |  | 3,308,603 | (9) |  | (41,257) | (17) |  | —
Accumulated other comprehensive loss |  |  | (2,733) |  |  | — |  |  | 2,733 | (18) |  | —
Total shareholder (deficit) equity |  |  | (3,269,858) |  |  | 3,975,355 |  |  | (38,524) |  |  | 666,973
Total liabilities and shareholders’ (deficit) equity |  | $ | 1,561,497 |  | $ | 28,168 |  | $ | (85,930) |  | $ | 1,503,735
Summary of sources and uses of cash on the Effective Date from implementation of the Plan of Reorganization |
| (1) |  | The table below reflects the sources and uses of cash on the Effective Date from implementation of the Plan of Reorganization (in thousands):
Sources: |  |  |
Release of restricted cash (a) |  | $ | 25,000
Additional funding from First Out Term Loan |  |  | 50,000
Reconsolidation of Canadian subsidiary |  |  | 1,100
Total sources of cash |  |  | 76,100
Uses: |  |  |
Exit Facility and DIP Facility rollover financing costs paid upon Effective Date |  |  | (5,032)
Professional success fees paid upon Effective Date |  |  | (21,400)
Total uses of cash |  |  | (26,432)
Net increase in cash |  | $ | 49,668
| a) |  | A portion of DIP Facility funds from restricted cash was released upon Effective Date
Summary of term loan facility agreement in accordance with the Plan of Reorganization |
(in thousands) |  |  |
Term Loan Facility: |  |  |
Senior Secured First Out Term Loan |  | $ | 110,000
Senior Secured Second Out Term Loan |  |  | 410,000
Total Debt – Exit facility(a) |  |  | 520,000
Less: |  |  |
Current portion of Long-term debt |  |  | (2,600)
Long-term debt, net of current portion |  | $ | 517,400
| (a) |  | The Exit Credit Facility bears interest at a rate equal to LIBOR plus 7.50% per annum, with a LIBOR floor of 1.00%. The First Out Term Loan is due in December 2024 and the Second Out Term Loan is due April 2025. The Exit Credit Facility contains customary provisions and reporting requirements, including prepayment penalties and a maximum leverage covenant that will be first measured January 31, 2022 and each quarter thereafter. Quarterly principal repayments of $1.3 million begin for the quarter ended April 30, 2021 and increase to $2.6 million for the quarter ended April 30, 2022 until maturity.
Summary of disposition of liabilities subject to compromise | The table below indicates the disposition of liabilities subject to compromise (in thousands):
Liabilities subject to compromise pre-emergence |  | $ | 4,472,954
Reinstated on the Effective Date: |  |  |
Lease liabilities (current and non-current) |  |  | (15,687)
Deferred tax liabilities |  |  | (26,107)
Other long-term liabilities |  |  | (3,796)
Total liabilities reinstated |  |  | (45,590)
Less amounts settled per the Plan of Reorganization |  |  |
Issuance of new debt |  |  | (410,000)
Issuance of warrants |  |  | (11,200)
Equity issued at emergence to creditors in settlement of Liabilities Subject to Compromise |  |  | (666,973)
Total amounts settled |  |  | (1,088,173)
Gain on settlement of Liabilities Subject to Compromise |  | $ | 3,339,191
Summary of cumulative impact of the reorganization adjustments |
| (1) |  | The table reflects the cumulative impact of the reorganization adjustments discussed above (in thousands):
Gain on settlement of Liabilities subject to compromise |  | $ | 3,339,191
Provision for income taxes |  |  | (4,377)
Professional success fees paid upon Effective Date |  |  | (21,400)
Exit Facility and DIP Facility rollover financing costs paid upon Effective Date |  |  | (5,032)
Cancellation of predecessor shares and additional paid in capital |  |  | 221
Net impact on Accumulated deficit |  | $ | 3,308,603
Summary of reorganization value of Successor company in excess of asset fair value - Goodwill |
(in thousands) |  |  |
Reorganization value of Successor company |  | $ | 1,503,735
Less: Fair value of Successor company assets |  |  | (1,008,600)
Reorganization value of Successor company in excess of asset fair value – Goodwill |  | $ | 495,135
Summary of fresh-start adjustment to acquired intangibles assets |
| (1) |  | The Company recorded an adjustment to intangible assets for $516.1 million as follows (in thousands):
|  | Estimated fair value |  | Estimated useful life
Developed software/ courseware |  | $ | 261,600 |  | 3 – 5 years
Customer contracts/ relationships |  |  | 279,500 |  | 12.4 years
Trademarks and trade names |  |  | 6,300 |  | 9.4 years
Backlog |  |  | 90,200 |  | 4.4 years
Skillsoft trademark |  |  | 91,500 |  | Indefinite
Publishing rights |  |  | 35,200 |  | 5 years
Capitalized software |  |  | 1,786 |  | 5 years
Total intangible asset upon emergence |  |  | 766,086 |  |
Elimination of historical acquired intangible assets |  |  | (249,962) |  |
Fresh-start adjustment to acquired intangibles assets |  | $ | 516,124 |  |
Summary of cumulative impact of the fresh-start adjustments |
| (1) |  | The table below reflects the cumulative impact of the fresh-start adjustments as discussed above (in thousands):
Fresh-start adjustment to accounts receivable, net |  | $ | (990)
Fresh-start adjustment to prepaid assets and other assets (including long-term) |  |  | (20,792)
Fresh-start adjustment to goodwill |  |  | (580,639)
Fresh-start adjustment to intangible assets, net |  |  | 516,124
Fresh-start adjustment to operating lease right-of-use assets and liabilities, net |  |  | 317
Fresh-start adjustment to deferred revenue (current and non-current) |  |  | 116,252
Fair value adjustment to debt |  |  | 5,050
Fair value adjustment to other long-term liabilities |  |  | (400)
Total fresh-start adjustments impacting reorganization items, net |  |  | 34,922
Elimination of accumulated other comprehensive loss |  |  | (2,733)
Tax impact of fresh-start adjustments |  |  | (73,446)
Net impact on accumulated deficit |  | $ | (41,257)
Summary of reorganization items incurred as a result of the Chapter 11 cases | Reorganization items incurred as a result of the Chapter 11 cases are presented separately in the accompanying Consolidated Statement of Operations for the period presented, as follows (in thousands):
|  | Predecessor
|  | February 1, 2020
|  | through August 27,
|  | 2020
Gain on settlement of Liabilities subject to compromise |  | $ | 3,339,191
Impact of fresh-start adjustments |  |  | 34,922
Exit Facility and DIP Facility rollover financing costs paid upon Effective Date |  |  | (5,032)
Write-off of pre-petition debt and DIP issuance costs |  |  | (9,461)
Professional success fees paid upon Effective Date |  |  | (21,399)
Professional fees and other bankruptcy related costs |  |  | (13,076)
Gain on Deconsolidation of Canadian subsidiary |  |  | 4,100
Reorganization items, net |  | $ | 3,329,245
|  | Successor |  |  | Predecessor
|  | August 28, 2020 |  |  | February 1, 2020
|  | through January 31, |  |  | through August 27,
|  | 2021 |  |  | 2020
Cash payment for reorganization items, net |  | $ | 784 |  |  | $ | 42,916

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