Confluence Technologies Inc. completed the first steps of a debt exchange transaction with its lenders to extend its revolver, provide additional liquidity, and temporarily reduce the company?s interest expense. The deal follows a prolonged period of negative cash flow and tightening liquidity. The company is extending the revolver by two years and giving it a super-priority ranking, issuing a new super-priority term loan, and converting the second-lien term loan to a new 1.5-lien term loan. The sponsor also contributed new junior payment-in-kind (PIK) preferred equity. We consider the transaction distressed and tantamount to default because some lenders are receiving less than what was originally promised under the credit agreements, including existing first-lien and second-lien lenders converting to a more junior
