My Alarm Center Files for Chapter 11 Bankruptcy to Eliminate Debt
A restructuring plan will provide for elimination of approximately $235 million of legacy debt obligation for My Alarm Center and affiliates.
NEWTOWN SQUARE, Pa. — Secure Home Holdings — which operates five affiliates including nationwide security provider My Alarm Center — filed for Chapter 11 protection in Delaware on Sunday.
In a statement, the company said all of its senior lenders and other key stakeholders have agreed to support a prepackaged plan of reorganization to eliminate approximately $235 million of legacy debt obligations.
The company’s other security brands are Alarm Monitoring Service of Atlanta, Fort Worth, Texas-based Hawk Security Services, Los Angeles-based ACS Security and DIY wireless system provider LivSecure. Together the brands staff around 475 employees, including call center personnel, security guards, monitoring and central station dispatch staff, service technicians, sales representatives and administrative staff. (My Monitoring Center formerly operated as Alarm Capital Alliance.)
The businesses reported 2020 revenues derived from monitoring contracts totaled approximately $88 million, while revenues from services, installation and other sources totaled around $7 million.
The company has received commitments from its senior lenders for $15 million of fresh capital to continue providing uninterrupted service to its customers during the restructuring, while also meeting its financial obligations to vendors and employees.
“We expect a full and quick recovery and are already seeing a notable shift in that direction with increased sales and acquisition opportunities. As to the filing, the structure is a ‘prepackaged plan,’ and because of that it should wrap up very quickly over the next 60 days,” Anastasia Bottos, president and COO of My Alarm Center, explained to SSI via an email.
“Our long-standing vendor and partner relationships will remain unimpaired during the restructuring. Once finalized, the remaining debt will be converted to equity, and a new capital structure will be put in place to support the needs of My Alarm Center going forward,” Bottos continued.
Lead Up to Chapter 11 Filing
In the bankruptcy filings, Secure Home Holdings/My Alarm Center CEO Amy Kothari states that in late 2019 the company sought an amendment to its revolving credit facility to avoid certain projected potential covenant defaults. However, the company was unable to obtain the necessary consents to amend the facility and covenant violations occurred.
The covenant violations reduced the company’s ability to access funds under the revolving credit facility, hampering its ability to replace attrition and grow the business by generating new contracts and acquiring contracts originated by third parties.
Raymond James and Associates, the company’s investment banking firm, then began to pursue potential acquisitions with strategic targets, seeking an acquisition transaction with an intent to drive synergies and incremental cash flow that could provide a platform for a recapitalization.
In addition, Kothari states, the company and its advisors explored potential sale transactions to prospective financial and strategic acquirers, as well as contacted numerous potential debt financing parties to explore refinancing opportunities.
Each of these efforts, however, failed to materialize.
Kothari also cites in the filing that the business has been negatively impacted by the COVID-19 pandemic. A significant portion of the company’s customer contracts are derived from door-to-door sales activity and in-home installations; however, these activities came to an abrupt halt with the onset of the pandemic and mandatory statewide stay-at-home orders, she explains.
The pandemic also impacted the company’s efforts to raise capital and pay down debt. Prior to the pandemic, Kothari says the company signed letters of intent with two parties for certain asset divestitures and due diligence was nearly completed.
“However, both potential purchasers materially reduced their offers post-pandemic, rendering the transactions no longer viable,” she explains.
Among other financial headwinds for the company, Kothari cites the decision by two of its major lenders to exit all home security loans. This resulted in the company defaulting on a pair of credit agreements and unable to draw on a revolving credit facility.
The company’s largest unsecured creditors include various interests of investment management company Invesco Ltd., which is owed more than $39 million, and Goldman Sachs Specialty Lending Group, which is owed nearly $34 million.
Woodforest National Bank is listed for a contingent $6.8 million government loan under the federal Paycheck Protection Program. The Internal Revenue Service (IRS) is also listed as an unsecured creditor and is owed about $1.1 million for Social Security payroll tax deferrals under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Interests of Oaktree Capital Management are owed $2.9 million in unsecured debt. In 2017, funds managed by the global alternative investment management firm purchased a controlling investment in My Alarm Center.
My Alarm Center is represented in the bankruptcy proceedings by Skadden, Arps, Slate, Meagher & Flom; Chipman Brown Cicero & Cole; M3 Partners; and Raymond James.
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