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Rackspace Technology Inc (NASDAQ:RXT) is reportedly finalizing a deal with its creditors to provide the company with a new influx of cash, lighten its debt load, and reorganize the repayment hierarchy.
This arrangement would grant Rackspace approximately $275 million in new funds, prioritized above current borrowings for repayment.
Additionally, the agreement includes a debt exchange offer at values less than face value, accessible to all secured lenders but with enhanced conditions for those who were part of the negotiation process, Bloomberg reports.
Creditors engaged in a previous cooperation agreement will benefit from more favorable terms than lenders who did not participate.
The company and its primary investor, Apollo Global Management Inc (NYSE:APO), have not commented on these developments.
In 2023, some of Rackspace’s lenders agreed to collective action in anticipation of debt discussions to solidify their negotiating position.
This restructuring strategy, featuring preferential terms for certain creditors, mirrors recent trends in the financial maneuvers of other companies facing similar economic challenges.
These include Apex Tool Group, GoTo Group Inc, and Lumen Technologies Inc (NYSE:LUMN), which have proposed restructuring plans with special provisions for select investors.
Rackspace will release its fourth quarter and full year 2023 financial results after the market closes on Tuesday, March 12, 2024.
Analysts expect the company to report a quarterly EPS loss of $(0.04) versus a year-ago profit of $(0.06). Rackspace Technology will likely report quarterly revenue of $714.72 million, compared to $787 million in the year-earlier quarter.
The company’s 3.50% first-lien notes due in 2028 were last noted trading at 40.5 cents on the dollar, as per the report, highlighting the pressing need for the restructuring plan to address its financial standing.
Investors can gain exposure to the stock via Texas Capital Texas Small Cap Equity Index ETF (NASDAQ:TXSS) and Schwab Fundamental U.S. Small Company Index ETF (NYSE:FNDA).
Price Action: RXT shares traded higher by 7.1% at $2.25 on the last check Tuesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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