By Alejandro Lazo
Washington Post Staff Writer
Thursday, February 19, 2009
McLean consulting giant BearingPoint, struggling under a heavy debt load, filed yesterday for bankruptcy protection.
The Chapter 11 filing came as a debt deadline approached. On April 15, some of BearingPoint's lenders would have had the option of requiring the company to pay off $200 million in loans, plus interest. The company also faced the prospect of repaying all of its loans if its stock was delisted from the New York Stock Exchange, BearingPoint said in a news release yesterday. The exchange has halted trading of the company's stock, which is now listed for pennies on an over-the-counter exchange.
"Our day-to-day operations will continue uninterrupted and we want to assure our employees and customers that we remain committed to serving our clients and to providing world-class consulting solutions," Ed Harbach, BearingPoint chief executive, said in the statement. "This restructuring is an important step to secure a better and stronger future."
Spun-off from the accounting giant KPMG in 2001, BearingPoint is one of the area's major information technology contracting firms, competing against Accenture, CSC and Lockheed Martin.
BearingPoint's government work, the largest slice of its business, has involved a host of technology projects for clients ranging from the Marine Corps to the Department of Health and Human Services. The firm received $520 million in government contracts in 2007, according to the Web site Fedspending.org.
The company has about 15,000 employees around the world, with more than 3,600 based in the Washington area. But the company has struggled with a host of accounting problems that spurred a 2005 Securities and Exchange Commission investigation and eventually pushed the firm to take on loans to stay liquid.
BearingPoint's Chapter 11 plan, filed in the Southern District of New York, would reduce its total debt from about $1 billion to $300 million by replacing various lines of credit with new arrangements and issuing new stock to its debtors, said Aaron Bedy, a company spokesman. Senior management will remain in place and the company has no immediate plans for layoffs, Bedy said. Operations based outside the United States will not be affected by the filing.
The filing was "pre-arranged" with the support of the company's senior secured lenders, which will help speed the restructuring, BearingPoint said. It is subject to approval by the bankruptcy court.
Last year, as its stock price sank, BearingPoint tried to pursue a sale or a merger, hiring investment bank Greenhill & Co. as an adviser. The recession and credit crunch soured those plans. BearingPoint asked Greenhill to investigate renegotiating its debt or exchanging it for equity. It has also employed the restructuring firm AlixPartners to help come up with an operating plan, naming AlixPartners Managing Director Kenneth A. Hiltz as its chief financial officer.
Staff writer Dana Hedgpeth contributed to this report.