Rackspace Technology Inc (RXT) is reportedly in the final stages of securing a deal with its creditors to inject new capital into the company, reduce its debt burden, and restructure its repayment priorities. This move comes as the company aims to strengthen its financial position and navigate through challenging economic conditions.
Under the proposed arrangement, Rackspace is set to receive around $275 million in new funds, which will be prioritized for repayment ahead of existing borrowings. In addition, the deal includes a debt exchange offer at values below face value, with enhanced conditions for secured lenders who were involved in the negotiation process.
Creditors who had previously cooperated with the company are expected to benefit from more favorable terms compared to those who did not participate in the negotiations. Both Rackspace and its primary investor, Apollo Global Management Inc (APO), have not yet commented on these developments.
This restructuring strategy, which offers preferential terms to certain creditors, reflects a trend seen in the financial maneuvers of other companies facing similar challenges. Companies like Apex Tool Group, GoTo Group Inc, and Lumen Technologies Inc (LUMN) have also proposed restructuring plans with special provisions for select investors.
Rackspace is scheduled to release its fourth-quarter and full-year 2023 financial results after the market closes on Tuesday, March 12, 2024. Analysts are anticipating a quarterly EPS loss of $(0.04) compared to a year-ago profit of $(0.06), with quarterly revenue expected to be $714.72 million, down from $787 million in the previous year.
The company’s 3.50% first-lien notes due in 2028 were recently trading at 40.5 cents on the dollar, underscoring the urgency for the restructuring plan to address its financial position.
Investors looking to gain exposure to Rackspace Technology can consider options such as the Texas Capital Texas Small Cap Equity Index ETF (TXSS) and Schwab Fundamental U.S. Small Company Index ETF (FNDA).
As of the latest check, RXT shares were trading higher by 7.1% at $2.25. This content was partially produced with the help of AI tools and reviewed by Benzinga editors.
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