How Skillsoft Got In and Out of Bankruptcy in Just Over 2 Months
By Aniqah Majid
September 04, 2020
On August 27, the corporate eLearning compliance company, Skillsoft, announced that it had successfully emerged from bankruptcy. The company filed under chapter 11 protection, in the U.S. Bankruptcy Court for the district of Delaware, in early June with the incentive of reducing its overall debt and increasing it’s liquid assets.
Through the court-supervised process, the company succeeded in reducing its debt by $1.5 billion dollars and secured $50 million in cash, giving them a leverage ratio of approximately 3.5x net debt-to-LTM EBITDA. Through this revival, Skillsoft’s Chief Administration Officer, John Frederick, pledges that the company will invest more in new resources and products for consumers as a response to the demands of COVID-19.
“We remain focused on supporting our customers – particularly through this unusual time as they adapt at an unprecedented pace to changing workplace and employment needs in response to the growing skills gap and in the face of a global pandemic,” Frederick noted in a statement.
Skillsoft Currently Serves 65% of Fortune 500 Companies
The US economy has grown at an unprecedented level in the last several years. This has led many companies to take on a record amount of debt. Though Skillsoft remained profitable, it risked a hit in growth opportunity from acquiring too much in debt and not enough in assets. By the time they filed under Chapter 11 on June 14, the company had accumulated approximately $2 billion in debt with little in liquidity. The rate of investment did not balance out appropriately with the amount of returns the company owed to its corporate shareholders.
A particularly active night for chapter 11 bankruptcy filings:
— 💥PETITION💥 (@petition) June 15, 2020
In an effort to reduce their overall debt down to $410 million and secure assets of around $50 million, the company filed under the bankruptcy claim. With a commitment for $60 million in debtor-in-possession (DIP) financing, provided by lien lenders, Skillsoft set out to decrease their debt whilst keeping internal corporate relations relatively unscathed.
At its core, Skillsoft is a corporate management training company which provides free courses and training to international organizations and companies looking to strengthen their workforce. From tech development to workplace compliance, the company uses a mixture of online tools and learning services to teach individuals the transferable skills necessary to stand out in the current job economy.
eLearning platforms like Skillsoft are becoming essential to international companies that rely on middle management and corporate fluency to ensure company policy is enforced on a global scale. Clients that exemplify this profile include, BT Technology, NPower and the Royal Bank of Scotland.
Due to the pressures of social distancing and remote working, corporate compliance training in the traditional setting is now more difficult to deliver. It is now unsafe to gather a group of employees in a room and lecture them on the company’s code of conduct. This is where Skillsoft and other eLearning service providers have realized an added value proposition. They provide the materials and automated processes needed by companies, whilst eliminating the factor of in-person contact.
COVID-19 Has Highlighted the Efficiency of Online Corporate Training, Proving to Be Less Time-Consuming and More Cost-Effective
With a subscriber base of around 36 million and an annual growth rate of 42%, the short-term Chapter 11 re-organization has worked to the benefit of the company’s future motivations, strengthening its economic standing in the competitive tech market. Filing for Chapter 11 protection allows a safety net or specialized business solution for companies who are looking to gain liquidity. This is no more prevalent than in the case of Skillsoft, who intended to emerge from Chapter 11 on an “expedient basis.”
Though many companies have filed under bankruptcy due to the strains of the pandemic, the e-learning training market has proceeded with more positive predictions. Research shows that these companies will ascend in higher growth rates for the next five years.
The Corporate eLearning Market Is Expected to Grow at a CAGR of 9.16% by 2025
In 2018, the global E-learning Corporate Compliance Training market size in the United States, Europe and China was $3 trillion and it is expected to reach $8 trillion by the end of 2025, with a CAGR of 12.8% during 2019-2025. The reasons for this growth in demand directly comes from the adoption of microlearning in employee training. Skillsoft and similar companies are all investing in online programs which allow employees to ingest information in minutes rather than hours in costly training meetings.
It is no coincidence that Skillsoft has emerged with a stronger balance sheet and ample liquidity. Bankruptcy in Skillsoft’s case was never predicted to be the straw that broke the camel’s back, but rather an administrative reshuffling where they would end up with better economic prospects for the future.
Featured Image: Morgan Housel, Unsplash.