KKR & Co. LP (KKR) , Franklin Square Capital Partners and GSO Capital Partners have purchased all of Allen Systems Group Inc.'s first-lien debt from TPG Opportunities Partners, according to sources.
Naples, Fla.-based Allen Systems, a privately-held provider of enterprise IT software solutions which is also known as ASG Software Solutions, announced on Nov. 9 that the investor group had purchased the first-lien debt but didn't disclose who the seller was.
Multiple sources, who asked not to be named, said seller is TPG Opportunities, an investment platform of Fort Worth, Texas, private equity firm TPG Capital LP.
TPG officials didn't immediately return a request for comment.
One source said that Allen Systems will now need to recapitalize its balance sheet and will likely do this by converting its debt into equity. The source believes all the company's second-lien debt will be converted into equity with some of the first-lien debt possibly following the same path.
Blackstone Group LP's credit arm GSO Capital Partners, Franklin Square and KKR's credit business hold the majority of Allen Systems' second-lien debt.
Calls to GSO, Franklin Square and KKR weren't returned on Monday.
John DiDonato of Huron Consulting Group Inc., who is serving as Allen Systems' chief restructuring officer, couldn't be reached for comment.
The company was also advised by investment bankers from Rothschild, sources said.
Allen Systems officials declined to comment.
The company has $300 million in 10.5% second-lien notes, which mature on Nov. 15, 2016.
Allen Systems has a first-lien term loan and revolver due in December 2017. The company has a $25 million revolving credit facility, $214 million in first-lien term loans, and $10 million outstanding under senior secured foreign credit facilities.
Allen Systems said in the announcement that it has entered into discussions with the investor group to further deleverage its capital structure and provide future growth financing.
"This further investment demonstrates our commitment to support ASG's business and will position the company for long-term success," said GSO managing director Brad Marshall in the statement. "We are confident that our additional support for the company will provide a foundation for ASG to execute on its long-term strategy and maintain its strong focus on providing its customers with leading and innovative IT solutions."
Allen Systems, which is owned by lone shareholder Arthur Allen, failed to make a $15.8 million interest payment on its second-lien notes on May 15 but had a 180-day standstill period under the terms of the notes, which hasn't yet expired.
The systems management and cloud computing software provider also missed an interest payment on the first-lien debt on April 21 and failed to make it up after the five-day grace period. The company also failed to comply with some of their financial maintenance covenants.
Allen Systems had a forbearance agreement with its first-lien lenders, which expired on Sept. 30.
In June, Moody's Investors Service Inc. disclosed that Allen Systems was in the process of exploring potential strategic alternatives, which could include a potential sale or balance sheet restructuring.
The company's financial issues started in 2012, when Allen Systems was confronted with declining revenues from its legacy products, such as the ASG-Becubic and ASG-TMON family of products.
In the statement Sunday, KKR principal Nikhil Srivastava said, "We made this investment after gaining a deep understanding of ASG's people and products, and the significant value they bring to the market. We are confident that with our further support for the company, ASG can enhance its ability to deliver innovative technology at competitive prices, strengthen its relationships with its customers and achieve long-term financial success."