Bit barn biz Cyxtera files for Chapter 11, hopes to bounce back after reboot

Overseas subsidiaries unaffected, sale still on the table

Global datacenter operator Cyxtera has filed for Chapter 11 bankruptcy protection in the US, saying it aims to use this to restructure and put the company back on a more sound financial footing.

The Florida-based outfit provides colocation and interconnection services via more than 60 datacenters in over 30 markets, including three sited around London.

Last year, Cyxtera was said to be exploring strategic options, including a sale, and was working with advisors to decide on the best way forward after reporting a net loss of $257.9 million for the previous year.

However, the company has now entered into a pre-arranged Chapter 11 process with the backing of some of its lenders to carry out a "comprehensive balance sheet restructuring" while it continues to conduct business operations.

Cyxtera announced in May it had received $50 million in new financing from lenders that hold over two-thirds of its outstanding term loan, in exchange for which it agreed to enter into a Restructuring Support Agreement aimed at ensuring the company's longer-term viability.

In the latest move, the company said it has received a commitment for $200 million in debtor-in-possession financing from the same lenders, although it isn't clear if this includes last month's $50 million or is additional to it. This is convertible into exit financing upon the company's emergence from the court-supervised bankruptcy process, and should be sufficient to support Cyxtera as it gets back on its feet, the company claimed.

Chief executive Nelson Fonseca said in a statement that both Cyxtera and its creditors had decided this process would be the best path forward for Cyxtera in order to find ways to grow profitably.

"We have thoroughly evaluated options to enhance value for the company and our stakeholders," Fonseca said, adding: "We are confident these steps will enable us to position our business for the long term as we continue serving our customers with innovative services and the highest levels of support."

Cyxtera indicated it is "continuing to pursue a potential sale of the business or a significant investment from a new investor" as it proceeds with the restructuring process.

Cyxtera's subsidiaries operating in the United Kingdom, Germany, and Singapore are not included in the court-supervised process.

This should mean they just continue to operate as normal, unless the US mothership fails in its restructuring process and goes into liquidation, in which case they would likely be sold off. Last year Sungard was broken up on both sides of the pond.

Cyxtera said it has filed a number of motions with the Bankruptcy Court for the District of New Jersey seeking authorization to support its operations, including paying employees, and expects to receive court approval shortly. Cyxtera said it will pay vendors and suppliers in full for goods and services provided on or after the filing date, and that it intends to continue operations as normal.

In its last released earnings results for the year to December 31, 2022, Cyxtera said its revenue increased 6 percent year-on-year to $746 million, but the company reported a net loss of $355.1 million, including a non-cash goodwill impairment charge of $153.6 million. ®