Lenders for Cyxtera Technologies will provide the colocation provider with $50 million in new funding while the company seeks to arrange a sale or new capital, Cyxtera said Thursday. If the company is unable to strike an "acceptable transaction," its lenders will have the right to take a majority stake in the company through a Chapter 11 bankruptcy proceeding.
The timetable for a transaction was not stated, but Cyxtera said it expects an outcome "in coming weeks." The $50 million allows Cyxtera to continue to operate its data center network, support customers and pay its employees. To procure the $50 million, Cyxtera entered into a Restructuring Support Agreement (RSA) that outlines the company's options.
"To the extent the process does not result in an acceptable transaction with a third party, as defined by the RSA, the Company would implement a comprehensive financial restructuring and transition majority ownership of the business to the Lenders through an expedited, voluntary court-supervised process under Chapter 11 of the U.S. Bankruptcy Code," Cyxtera said.
Cyxtera has been considering strategic options to reduce its debt load, amid reports that it was seeking a buyer or capital raise. Thursday's announcement followed a trading session in which Cyxtera shares dropped 28% to 17 cents per share, giving the company a market capitalization of just $31 million.
The loan and RSA provide Cyxtera with additional time to line up a deal.
“With the support of our lenders, we are taking steps to strengthen our financial position and ensure that our business is best positioned for the long term," said Nelson Fonseca, Cyxtera’s Chief Executive Officer. "We are confident in our ability to continue growing our business and creating value for the customers and communities we serve as we work to implement the transactions contemplated by the agreement."
The company's lenders have agreed to offer long-term financing for potential investors to address "existing near-term maturities." Cyxtera has long-term debt agreements of about $865 million that come due in April 2024 and May 2024.
Cyxtera also said it will "continue evaluating its data center footprint, consistent with its commitment to optimizing operations."
Cyxtera Technologies operates a global network of 60 data centers and supports 2,300 customers and had $746 million in revenue in 2022. The company was formed in 2016 when Medina Capital, led by former Terremark CEO Manuel Medina, teamed with investors including BC Partners to buy the data center portfolio of CenturyLink for $2.15 billion. It was one of several data center players seeking to build a colocation business atop a portfolio of data centers spun off by telecom companies.
“We thank our customers and partners for their continued support, and we are grateful to our employees for their hard work and commitment to Cyxtera," said Fonseca. "We look forward to continuing to provide innovative, cloud-like data center services and enabling our customers to meet their evolving business needs."
Cyxtera also shared financial highlights from its first quarter of 2023, reporting a net loss of $325 million, including a non-cash Goodwill impairment charge of $278 million. Total revenue increased by $14.3 million to $196.7 million, up 7.8% from the same period a year ago.
“Our solid first quarter results underscore the strength of our operations and Cyxtera’s ability to deliver consistent revenue growth," said Carlos Sagasta, Cyxtera’s Chief Financial Officer. "We appreciate the continued patience and support of our suppliers and business partners and look forward to working closely with them to drive our mutual success.”