Maxcom files for Chapter 11 bankruptcy for the second time

November 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

November 2019 Issue

For the second time in six years, Mexican telecommunications provider Maxcom Telecomunicaciones SAB has filed for pre-packaged Chapter 11 bankruptcy protection

Maxcom and a US subsidiary – Maxcom USA – filed for Chapter 11 protection in New York having won backing for its restructuring plan from the creditors holding the majority of the company’s bond debt. The company’s pre-packaged plan will reduce its debt by $36m. In its filing, the company listed both assets and liabilities of between $100m and $500m.

The company said that its bankruptcy proceedings will require it to undergo a debt exchange which will see holders of step-up senior notes that mature in 2020 receive new notes and cash. Holders of two-thirds of the step-up notes have agreed to the swap, and general unsecured and equity claims would be unimpaired, said the company in a statement announcing the filing.

Judge Robert Drain of the US Bankruptcy Court in White Plains, New York said he would consider approving Maxcom’s pre-negotiated debt-cutting plan at a hearing in September.

Maxcom expects to continue to operate without any disruption to its business during the Chapter 11 process. The company also intends to maintain the relationships it enjoys with its customers, suppliers and vendors. In a statement, Maxcom confirmed that its current cash on hand, as well as projected positive cash flow from operations, will be sufficient to fund its operations during the short period of time that Maxcom intends to remain in Chapter 11.

“The company has worked through an extremely complex and difficult situation over the past five years, such as currency devaluations and industry rules changes that have impacted the company’s results,” said Erik Gonzalez, chief financial officer of Maxcom. “However, the steps taken by the company prior to the commencement of the Chapter 11 restructuring process, together with a successful restructuring of the 2020 step-up senior notes, will reduce the company’s debt, strengthen its balance sheet, put the company in a more competitive and robust position to serve our customers and on a path to returning greater value to its creditors and shareholders. The approval of the pre-packaged Chapter 11 plan, along with the equity injection associated to this process, remain as the last steps to completing a successful restructuring, and we are very optimistic about the future of the company and its business. I would like to thank our customers and vendors for their continued support during this process. We also appreciate the ongoing loyalty and support of our employees, whose dedication and hard work are critical to our success and to the future of the company. Our management team is committed to making this financial restructuring successful and leading Maxcom toward a bright future.”

The August filing was the second time that Maxcom had filed for Chapter 11 protection in recent years. In July 2013, the company and 14 of its affiliates filed for a pre-packaged bankruptcy in Wilmington, Delaware. The firm emerged from that period of bankruptcy in October 2013 after significantly reducing its debt load and securing capital infusions worth $45m.

Founded in 1999 after the Mexican telecommunications industry was deregulated, Maxcom is an integrated telecommunications services provider which offers ‘last mile’ voice and data services to residential, small- and medium-sized business customers in Mexico. The company’s corporate headquarters is in Mexico City.

In late August, a group of Maxcom’s bondholders ensured that the company’s stay in bankruptcy protection would be extended by at least seven days after successfully arguing that they needed more time to look into the vote of the company’s pre-packed bankruptcy plan.

Richard Summerfield