Fusion Connect files for Chapter 11 bankruptcy

August 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

August 2019 Issue

As a result of the failure of two recent acquisitions, cloud services provider Fusion Connect, and each of its US subsidiaries, has entered into a Restructuring Support Agreement (RSA) with lenders holding more than two-thirds of the aggregate outstanding principal amount of its first-lien loans.

In order to effectuate the RSA, the company has filed voluntary petitions under Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of New York. The RSA provides Fusion with a clear path to significantly deleverage its balance sheet, allowing for more investment in customer experience, product innovation and infrastructure.

Fusion’s two Canadian subsidiaries are not included in the Chapter 11 filing.

In addition, Fusion has secured a commitment from certain first lien lenders – the First Lien Ad Hoc Group – for a debtor-in-possession financing that provides for a secured credit facility in the aggregate principal amount of $59.5m, including $39.5m in new money term loans.

In 2018, Fusion borrowed $680m to acquire the cloud and business-services businesses of MegaPath and Birch Communications – both of which failed to meet performance projections.

“Fusion has been in constructive discussions with our lenders as we evaluated multiple options to improve the company’s financial structure and position the company for future growth,” said Matthew Rosen, chairman and chief executive of Fusion. “This has been a thoughtful and considered process, and we firmly believe that our voluntary Chapter 11 filing is the most appropriate course of action to protect and enhance the value of our business while securing the best possible outcome for our stakeholders.”

A leading provider of integrated cloud solutions to small, medium and large businesses, Fusion’s advanced, proprietary cloud services platform enables the integration of leading-edge solutions in the cloud, including cloud communications, contact centre, cloud connectivity and cloud computing.

While the RSA and Chapter 11 processes proceed, all of Fusion’s businesses are operating as usual, with the company committed to fulfilling its commitments to its customers, employees, agents and key vendors. Moreover, Fusion has filed customary first-day motions that will 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, subject to court approval.

As part of the restructuring, Fusion will use the protections and framework of Chapter 11 to efficiently maximise the value of the business through a sale process that will include existing lenders, as well as potential new investors. “We are grateful for the continued financial support of our lenders and the continued support, loyalty and trust of our stakeholders,” added Mr Rosen.

Advising Fusion during the restructuring and Chapter 11 process is FTI Consulting, with PJT Partners, Inc. as financial advisers. Weil, Gotshal & Manges LLP is legal adviser. For the First Lien Ad Hoc Group, Greenhill & Co, LLC is financial adviser, with Davis Polk & Wardwell LLP acting as legal adviser.

Fusion has stated that it expects to emerge from Chapter 11 before the end of 2019 as a financially stronger company that continues to be well positioned to deliver its comprehensive portfolio of innovative single-source cloud solutions with exceptional customer support.

Mr Rosen concluded: “We are confident that we will emerge stronger than ever, with a renewed focus on delivering Fusion’s advanced single source cloud solutions and exceptional customer experience, now and for many years to come.”

Fraser Tennant