BY Fraser Tennant
Following the failure of its MegaPath and Birch Communications’ acquisitions to meet performance projections, cloud computing provider Fusion Connect, along with its US subsidiaries, has filed for Chapter 11 bankruptcy.
Last year, Fusion borrowed $680m, including senior lender loans, to acquire the cloud and business services businesses of Birch and MegaPath. However, the acquisitions piled on more debt than Fusion could repay.
In addition to its bankruptcy filing, Fusion has entered into a restructuring support agreement (RSA) with lenders. Fusion’s two Canadian subsidiaries are not included in the Chapter 11 filing.
While it proceeds with its bankruptcy filing and RSA, Fusion’s businesses are operating as usual. Its bankruptcy filing is designed to allow it to maintain its employee wage and benefit programmes, customer and agent programmes, and vendor payments for goods and services delivered in the ordinary course of business.
“Our lenders have provided us with funding during this process and we are pleased to share that our lenders have agreed to provide us with additional financing that will total $59.5m,” wrote Matthew Rosen, chief executive of Fusion Connect, in a letter to the company’s partners. “Along with Fusion’s usual cash flows, this will ensure that we will be able to operate our business as usual and fulfil our commitments to our valued customers and other stakeholders.
Mr Rosen also stated that Fusion is committed to paying all commissions in full and on time, and will continue to deliver the same portfolio of advanced cloud communications and secure managed services.
In May 2019, Fusion lost its listing on the Nasdaq because it failed to file its annual stockholder report on time.
Going forward, Fusion‘s management team and advisers have stated they will consider bids for the company’s US, as well as its Canadian operations. However, the company has made it clear that it does not intend to sell off individual assets. Any sale would need to be approved by the bankruptcy court.
Mr Rosen concluded: “We continue to measure our success by your success, and as we strengthen our financial position, we fully expect to find even more ways for us to sell, compete and grow together.”