SCHEDULE: Gates Capital Takes 27.2% Stake in XBP Global Holdings

Gates Capital Management and its affiliates acquired a 27.2% beneficial ownership stake in XBP Global Holdings, Inc. as part of a Chapter 11 reorganization plan.

Summary

• Gates Capital Management and its affiliates (the "Reporting Persons") acquired 31,931,506 shares of XBP Global Holdings, Inc. Common Stock, representing 27.2% of the outstanding shares.
• The acquisition occurred on July 29, 2025, as part of the effective Amended Joint Plan of Reorganization under Chapter 11 for Exela Technologies BPA, LLC and certain subsidiaries.
• Shares were received in exchange for 11.5% First-Priority Senior Secured Notes due April 2026 and for backstop commitments related to a $80 million debtor-in-possession (DIP) credit facility.
• Gates Capital Funds also received approximately $96 million principal amount of 12.000% First-Priority Senior Secured Notes due 2030 (Rollover Exit Notes) for their DIP Facility claims.
• Gates Capital Funds entered into a Gates Exit Facility Agreement, funding approximately $39 million of $40 million in new money loans to refinance a prepetition senior secured term loan facility, plus $6 million in take-back loans.
• A Registration Rights Agreement was established, granting Gates Capital Funds rights to register and resell their Common Stock, including through shelf and demand registrations.
• An ad hoc group of creditors, including Gates Capital, designated four new directors to the Issuer's board: Regina Paolillo, Robert D. Pryor, Sanjay Srivastava, and Randal T. Klein.
• Two existing directors, Martin P. Akins and J. Coley Clark, resigned.

Sentiment

Score: 6

Explanation: The filing details the successful execution of a Chapter 11 reorganization plan, which is a critical step for the company's future. Gates Capital's significant ownership stake and board representation indicate a committed, albeit distressed, investment. While the underlying reasons for bankruptcy are negative, the completion of the restructuring is a necessary positive step.

Positives

• Gates Capital, a significant investor, now holds a substantial stake (27.2%) and board representation, indicating strong alignment with the company's future.
• The company successfully emerged from Chapter 11 bankruptcy with a confirmed Plan of Reorganization, resolving a period of financial distress.
• The new financing structure, including the Gates Exit Facility Agreement, provides capital for refinancing and ongoing operations.
• The Registration Rights Agreement provides liquidity options for Gates Capital, which could be seen as a positive for future capital markets activity.

Negatives

• The company (or its predecessor entities) underwent Chapter 11 bankruptcy, indicating past significant financial distress.
• The acquisition of shares by Gates Capital was a result of debt-to-equity conversion and backstop commitments, reflecting a distressed situation.

Risks

• Reporting Persons may increase or decrease their positions in the Issuer, which could impact share price volatility.
• Future discussions with management or other stakeholders could lead to changes in business strategy, capital allocation, or corporate governance, which may or may not align with all shareholder interests.
• The company's ability to successfully execute its post-bankruptcy reorganization plan and achieve sustained financial stability remains a key challenge.

Future Outlook

Reporting Persons intend to continuously review their investment in XBP Global Holdings, potentially adjusting their positions based on the Issuer's financial position, strategic direction, market conditions, and other investment opportunities. They may engage in discussions with management and other stakeholders on various topics including business strategy, capital allocation, corporate governance, and mergers and acquisitions.

Management Comments

• Reporting Persons have no present plan or proposal that would relate to or result in any of the matters set forth in subparagraphs (a) (j) of Item 4 of Schedule 13D.
• Reporting Persons may have discussions with officers and directors of the Issuer in connection with their investment, covering a range of issues including business, management, investor communications, operations, capital allocation, dividend policy, financial condition, mergers and acquisitions strategy, overall business strategy, executive compensation, corporate governance, and environmental and social matters related to the Issuer's business and stakeholders.

Industry Context

This filing reflects the outcome of a significant corporate restructuring within the business process automation (BPA) or related technology services industry, as indicated by "Exela Technologies BPA, LLC." The emergence from Chapter 11 with a new major shareholder and board representation suggests a new phase for the company, potentially aiming for stabilization and growth in a competitive market. The involvement of a capital management firm like Gates Capital indicates a distressed asset investment strategy.

Comparison to Industry Standards

• The acquisition of a 27.2% stake by a single investment group post-bankruptcy is a substantial concentration of ownership, which is common in distressed asset turnarounds, allowing for more direct influence on corporate strategy.
• The provision of new money loans and conversion of existing debt into equity and new notes is a standard mechanism for recapitalizing a company emerging from Chapter 11.
• The granting of registration rights is a typical provision for large institutional investors receiving shares in a private or restructuring context, enabling future liquidity. Specific comparable companies, projects, or results are not mentioned in the filing.

Management Changes

Corporate Governance

Legal Proceedings

• Exela Technologies BPA, LLC and certain subsidiaries commenced voluntary Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas on March 3, 2025.
• The Bankruptcy Court entered an order confirming the Debtors Amended Joint Plan of Reorganization on June 23, 2025.

Related Party Transactions

• Gates Capital Funds received shares and notes as part of the Plan of Reorganization, which involved their prior holdings of April 2026 Notes and their backstop commitments for the DIP Facility.
• Gates Capital Funds entered into the Gates Exit Facility Agreement to provide new financing to the Debtors.

Stakeholder Impact

• Shareholders: Existing shareholders (prior to the reorganization) likely experienced significant dilution or loss of value due to the bankruptcy and new equity issuance. New shareholders (like Gates Capital) now hold a substantial stake, potentially influencing future value.
• Creditors: Creditors involved in the Chapter 11 process, including Gates Capital, received new equity and/or notes in exchange for their claims, representing the outcome of their recovery.
• Management: The board composition has changed, with new directors appointed by a significant creditor group, which will impact strategic decision-making and oversight.

Next Steps

• Reporting Persons will continue to review their investment in the Issuer.
• Reporting Persons may engage in discussions with Issuer management and other stakeholders on various strategic and operational matters.
• Reporting Persons may increase or decrease their positions in the Issuer's securities.
• The Issuer is obligated to file and maintain effective shelf registrations (Form S-3 or S-1) to allow resale of the Common Stock received by Gates Capital Funds.

Key Dates

Keywords

XBP Global Holdings, Gates Capital Management, Schedule 13D, Beneficial Ownership, Chapter 11, Bankruptcy Reorganization, Debt-to-Equity Conversion, DIP Facility, Registration Rights, Corporate Governance, Board Changes, Investment Management