Rackspace Technology Inc RXT It is reportedly striking a deal with its creditors to provide the company with a fresh influx of cash, lighten its debt load and reorganize its repayment hierarchy.
This agreement would provide Rackspace with approximately $275 million in new funds, with priority over existing loans for repayment.
Additionally, the deal includes a debt exchange offer at below par value, accessible to all secured lenders but with improved terms for those who took part in the negotiation process, Bloomberg reports.
Lenders committed to a previous cooperation agreement will benefit from more favorable conditions than lenders who have not joined.
The company and its main investor, Apollo Global Management Inc APOhave not commented on these developments.
In 2023, some Rackspace lenders have agreed to take class action ahead of debt discussions to solidify their negotiating position.
This restructuring strategy, characterized by preferential terms for some 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 LUMONEwho proposed restructuring plans with special provisions for selected investors.
Rackspace will release its fourth quarter and full-year 2023 financial results after the market close on Tuesday, March 12, 2024.
Analysts expect the company to report a quarterly earnings per share loss of $(0.04) compared to a profit of $(0.06) a year ago. Rackspace Technology will likely post quarterly revenue of $714.72 million, up from $787 million in the prior-year quarter.
The company’s 3.50% senior notes due 2028 last traded at 40.5 cents on the dollar, according to the report, highlighting the urgent need for the restructuring plan to address its financial situation .
Investors can gain exposure to the stock via Texas Capital Small Cap Stock Index ETF TXSS AND Schwab Fundamental US Small Company Index ETF FNDA.
Price Action: RXT shares were trading 7.1% higher at $2.25 at last check Tuesday.
Disclaimer: This content was partially produced with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.
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