Fusion Connect, which filed for chapter 11 bankruptcy early last month, has filed its reorganization plan. The company aims to complete the process and exit this fall.
Fusion filed chapter 11 after its acquisitions of MegaPath and Birch Communications’ cloud and business-services business failed to meet performance projections. The company and each of its U.S. subsidiaries filed voluntary petitions in the U.S. Bankruptcy Court for the Southern District of New York.
Fusion entered a restructuring support agreement (RSA) with lenders holding more than two-thirds of the aggregate outstanding principal amount of its first-lien loans.
In a statement to Channel Partners, Fusion said it “continues to make steady progress toward our goal of creating a stronger financial future for our company and shared as part of legal filings submitted on July 1, 2019, that we have requested a hearing to confirm our plan of reorganization – one of the last steps in the chapter 11 process – on or around Oct. 1, 2019. ”
“We look forward to completing this process with an enhanced capital structure that best positions our business for the future,” it said. “Meanwhile, we continue to serve our customers as usual with a full complement of advanced, fully integrated cloud communications, managed network services and cloud computing solutions. We remain fully committed to working with our valued channel partners to deliver exceptional service to our mutual customers now, and well into the future.”
Fusion borrowed $680 million, including the senior lender loans, to acquire Birch and MegaPath last year.
Senior lenders, owed about $574 million, could take over the company under a proposal to slash debt by $300 million unless a court-supervised auction prompts a more lucrative deal. A bid procedure motion will outline the sale process, and Fusion‘s management team and advisers will consider bids for its U.S. and/or Canada operations, but Fusion won’t be selling off individual assets. The court then would approve the sale.
Mike Sapien, Ovum’s vice president and chief analyst of enterprise services, said as the reorganization plan is still being shaped and Fusion has many CLEC assets from its acquisitions, he expects to see divestiture of some of its assets, more focus on its core voice/UC business and potentially selling off some customers that don’t fit its new plan.
“Until it gets submitted and approved, its chances of exiting bankruptcy [are] still unknown,” he said. “And I have no visibility of its debts and major creditors who have to agree to the new plan and lower return on their investment now. It is a really tricky balance and creditors can quickly turn on a firm and just want what they can get in the short term.”