Appgate: Prepack Restructuring Equitizes Debt and Resets Capital Structure
Appgate May 2024 Delaware prepack equitized funded debt and went effective July 2024 after fast confirmation.
Appgate, Inc., the Miami-based cybersecurity software company focused on zero trust network access and fraud protection, filed chapter 11 petitions on May 6, 2024, in the U.S. Bankruptcy Court for the District of Delaware with a prepackaged plan backed by 100% of its funded debt holders. The company carried approximately $170.2 million in funded debt across convertible notes and a revolving credit facility, all maturing in 2026. The prepackaged plan converted funded debt into new equity, transitioned Appgate to a privately held structure, and left general unsecured creditors unimpaired. The court entered a Confirmation Order on June 18, 2024, and the plan became effective on July 2, 2024. A Final Decree closed the cases on September 11, 2024.
| Debtor(s) | Appgate, Inc. (and 11 affiliates) |
| Court | U.S. Bankruptcy Court, District of Delaware |
| Case Number | 24-10956 (CTG) |
| Judge | Hon. Craig T. Goldblatt |
| Petition Date | May 6, 2024 |
| Reported Assets / Liabilities | At least $100 million each |
| Funded Debt | ~$170.2 million (convertible notes and revolving credit facility) |
| DIP Facility | $18 million term loan (8% PIK interest) |
| Confirmation Date | June 18, 2024 |
| Effective Date | July 2, 2024 |
| Outcome | Debt converted to equity; company transitioned to private ownership; existing equity canceled |
| Claims Agent | Donlin, Recano & Company, Inc. |
| Final Decree | September 11, 2024 |
Business Overview
Company and products. Appgate is a cybersecurity software and services company selling zero trust–focused products, including software-defined perimeter and related authentication and threat offerings, to enterprise and government customers. The company was awarded a DoD Enterprise Software Initiative blanket purchase agreement in November 2022.
SPAC listing and go-private. Appgate reached public markets through a SPAC combination completed in October 2021, which valued the company at approximately $1 billion. By 2024, Appgate described the chapter 11 process as a "comprehensive recapitalization" designed to transition to a privately held entity while eliminating funded debt and enabling SEC deregistration.
Operating metrics. The First Day Declaration described Appgate's revenue base as predominantly subscription, with 660+ customers in ~70 countries.
| Revenue mix (FY 2023) | Subscription 84%+; perpetual licenses ~3%; services ~13% |
| ARR | $33.7 million (2022) and $36.1 million (2023) |
| Customer scale | 660+ customers; 71 customers with ARR > $100,000 in 2023 |
| Table: Selected Operating Metrics |
Drivers of distress. The First Day Declaration attributed the decision to file to liquidity constraints, covenant pressure, and execution challenges, including sales strategy issues and macro conditions such as inflation and higher interest rates. The filing also referenced a strategic alternatives process that did not yield a capital solution on the required timeline. Appgate described the process as a consensual recapitalization that would allow the company to operate "more effectively and efficiently" as a private entity.
RSA and creditor support. The company announced that existing creditors agreed to convert debt to equity and highlighted Magnetar as a long-standing investor committing incremental investment. The First Day Declaration described the RSA, executed May 3, 2024, as supported by 100% of the first-lien convertible noteholders, 100% of the second-lien convertible noteholders, 100% of the revolver lenders, and approximately 89% of equity interests.
Capital Structure and Prepackaged Plan Mechanics
Capital structure at filing. Appgate's funded debt at the petition date totaled approximately $170.2 million as described in the First Day Declaration, comprising first-lien and second-lien convertible notes and a third-lien revolving credit facility. All three tranches matured in 2026.
| 1L convertible notes | $101.2 million principal; ~$2.0 million accrued interest; ~$103.2 million total (maturity Feb. 9, 2026) |
| 2L convertible notes | $8.8 million principal; ~$0.1 million accrued interest; ~$8.9 million total (maturity May 9, 2026) |
| 3L revolving credit facility (RCF) | $50.0 million principal; ~$8.1 million accrued interest; ~$58.1 million total (maturity Aug. 9, 2026) |
| Total funded debt | ~$170.2 million total |
| Table: Funded Debt Components (As Described in Bankruptcy Filings) |
The filings also described tax attributes, including federal net operating losses and section 163(j) carryforwards.
| Federal NOLs (as of 2023-12-31) | ~$247.9 million |
| Section 163(j) carryforwards (as of 2023-12-31) | ~$5.6 million |
| Table: Selected Tax Attributes (As Described in Bankruptcy Filings) |
Prepetition new-money funding. The filings described incremental new-money funding provided by certain first-lien noteholders since January 2024. Willkie Farr & Gallagher LLP advised Magnetar Capital in the recapitalization.
DIP Financing
DIP facility. Appgate obtained an $18 million term loan DIP facility as described in the DIP Motion, with 8% PIK interest and staged availability tied to interim and final approval. The company had approximately $3.0 million in accessible cash on hand at filing.
| Facility size | $18 million term loan DIP |
| Availability (staged) | $8 million upon interim approval; $10 million upon final approval |
| Pricing | 8% PIK interest |
| Agent | U.S. Bank Trust Company, National Association |
| Stated maturity | 120 days after the petition date, subject to earlier termination triggers described in the DIP documents |
| Budget controls | Rolling 13-week budget and variance reporting requirements described in the DIP documents |
| Liquidity at filing | ~$3.0 million accessible cash on hand |
| Table: DIP Facility (Selected Terms) |
Plan Structure, Claim Treatment, and Release Mechanics
Plan structure and claim treatment. Appgate's Confirmed Plan implemented a debt-to-equity recapitalization by distributing a new equity/unit structure to funded creditors and canceling existing equity interests. The first-lien and second-lien convertible note claims received allocations of new unit instruments, the revolver class was treated as impaired and received no distribution, and general unsecured creditors were treated as unimpaired. The company described the recapitalization as eliminating corporate debt and leaving trade creditors whole.
| Class 1 (other secured) | Unimpaired |
| Class 2 (other priority) | Unimpaired |
| Class 3 (1L convertible notes) | Impaired; distribution of Series A units and Class C units (with alternative elections referenced) |
| Class 4 (2L convertible notes) | Impaired; distribution of Series B units and Class C units |
| Class 5 (3L RCF) | Impaired; discharged/cancelled/released/extinguished with no distribution |
| Class 6 (general unsecured) | Unimpaired; reinstated or paid in full in cash |
| Class 10 (existing equity) | Impaired; canceled with no distribution |
| Table: Class Treatment (High-Level Summary; Selected) |
Management incentive plan. The Confirmation Order authorized a management incentive plan permitting incentive equity awards representing up to 15% of the Class C units as profits interests on a fully diluted basis.
U.S. Trustee objection and release mechanics. The U.S. Trustee Objection challenged the plan's third-party release structure and opt-out mechanics, arguing that equity holders receiving no distribution should not be required to affirmatively opt out to avoid releasing claims against non-debtor parties. The objection also argued that consent should not be inferred from silence, raised concerns about notice mechanics for equity held in street name, and contended that release provisions should include carve-outs for actual fraud, willful misconduct, and gross negligence.
The court confirmed the plan and approved the opt-out procedures, finding that the opt-out process and notices were adequate and that parties who did not timely opt out would be deemed bound by the third-party releases. The exculpation provision included explicit carve-outs for criminal acts, actual fraud, willful misconduct, and gross negligence. The third-party release language was broader and did not include the same carve-outs.
| Opt-out solicitation start | Around May 9, 2024 |
| Opt-out deadline | June 7, 2024 at 4:00 p.m. ET |
| UST objection focus (high level) | Opt-out mechanics for third-party releases, including concerns about deemed consent and scope of protections |
| Court ruling (high level) | Confirmation order overruled unresolved objections and approved opt-out procedures and third-party releases |
| Table: Releases and Opt-Out Mechanics (Selected) |
Post-emergence governance. The Confirmation Order identified executive officers including Manuel D. Medina and CEO Leo Taddeo. Taddeo was hired as CEO in 2022, bringing FBI cyber and special operations experience. The emergence announcement described additional equity financing from Magnetar and stated that certain existing lead investors became majority equity owners after emergence.
Claims and noticing agent. The court entered a Donlin Retention Order authorizing Donlin, Recano & Company, Inc. to serve as administrative advisor to the debtors effective as of the petition date, with services covering noticing, solicitation, claims management, and related administrative support.
Key professionals. Kirkland & Ellis LLP served as counsel to Appgate and Cole Schotz P.C. as Delaware local counsel. An Omnibus Final Fee Order approved final applications for the compensation period from the petition date through the effective date.
| Debtors' counsel | Kirkland & Ellis LLP |
| Local counsel | Cole Schotz P.C. |
| Investor-side counsel | Willkie Farr & Gallagher LLP (advising Magnetar Capital) |
| Table: Selected Professionals (External Reporting) |
| Professional (role) | Fees allowed | Expenses allowed | Total allowed |
| Kirkland & Ellis (debtors’ counsel) | $2,033,484.00 | $36,870.06 | $2,070,354.06 |
| Cole Schotz (Delaware co-counsel) | $407,816.00 | $4,922.70 | $412,738.70 |
| Triple P (restructuring advisor / investment banker) | $2,195,672.00 | $30,743.90 | $2,226,415.90 |
| Donlin (administrative advisor) | $13,268.80 | $0.00 | $13,268.80 |
| Grant Thornton (tax advisor) | $148,776.00 | $1,390.00 | $150,166.00 |
| Table: Allowed Professional Fees and Expenses (May 6, 2024 Through July 2, 2024) |
Key Timeline
| May 6, 2024 | Petitions filed and recapitalization plan announced |
| May 3, 2024 | RSA executed with broad funded-debt support |
| June 12, 2024 | U.S. Trustee filed an objection focused on third-party releases and opt-out mechanics |
| June 13, 2024 | Court entered order authorizing Donlin as administrative advisor |
| June 18, 2024 | Court entered Confirmation Order |
| July 2, 2024 | Plan became effective per the Effective Date Notice; existing equity canceled |
| August 16, 2024 | Deadline (45 days after effective date) to file professional fee claims for pre-effective date services |
| September 11, 2024 | Final Decree closed the cases and terminated certain claims and noticing services |
| Table: Timeline (Selected Milestones) |
Post-effective deadlines. The Effective Date Notice set a 45-day deadline after the effective date (August 16, 2024) for professional fee claims. The Final Decree entered September 11, 2024, closed the chapter 11 cases and terminated Donlin's claims and noticing services, requiring electronic delivery of imaged claims and the creditor mailing list into the court's CM/ECF system within 28 days.
Frequently Asked Questions
When did Appgate file for chapter 11 bankruptcy and where was the case filed?
Appgate filed chapter 11 petitions on May 6, 2024 in the U.S. Bankruptcy Court for the District of Delaware.
Was Appgate’s chapter 11 a prepackaged case, and who supported the plan?
The company described the filing as a consensual prepackaged restructuring designed to convert funded debt into equity and transition Appgate to a private ownership structure. Bankruptcy filings described RSA support from 100% of the first-lien convertible noteholders, 100% of the second-lien convertible noteholders, and 100% of the revolver lenders, alongside support from roughly 89% of equity interests.
How much funded debt did Appgate report at filing and what instruments made it up?
Bankruptcy filings described total funded debt of approximately $170.2 million as of the petition date, comprised of first-lien and second-lien convertible notes and a revolving credit facility .
Did Appgate use DIP financing, and what were the key DIP terms?
The DIP Motion describes an $18 million term loan DIP facility bearing 8% PIK interest, with $8 million available after interim approval and $10 million after final approval.
What happened to Appgate’s convertible notes and revolving credit facility under the plan?
Under the confirmed plan, the convertible note classes received distributions of new unit instruments, while the revolver class was treated as impaired and received no distribution.
Were general unsecured creditors impaired?
The plan treated general unsecured claims as unimpaired, with treatment described as reinstatement or payment in full in cash. Appgate also stated publicly that unsecured creditors would receive full payment in the ordinary course of business.
What happened to common shareholders?
Appgate's public statements around the filing indicated that existing common equity was expected to be canceled with no distribution to shareholders. The post-effective reports described the cancellation occurring on July 2, 2024 with no shareholder distribution.
When was the plan confirmed and when did it become effective?
The Delaware court entered the Confirmation Order in mid-June 2024, and the plan's effective date occurred on July 2, 2024.
Did the plan include third-party releases and an opt-out process?
The Confirmation Order approved opt-out procedures for third-party releases, including an opt-out deadline described as June 7, 2024 at 4:00 p.m. ET, and provided that parties who did not timely opt out could be deemed bound by the releases.
Who is the claims agent for Appgate?
Donlin, Recano & Company, Inc. serves as the claims and noticing agent (administrative advisor). The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.
Read more chapter 11 case research on the ElevenFlo blog.
