Cyxtera makes prearranged dual-track Chapter 11 bankruptcy filing

By Sarah Lizee

Olympia, Wash., June 5 – Cyxtera made a prearranged Chapter 11 bankruptcy filing on Sunday in the U.S. Bankruptcy Court for the District of New Jersey, according to a press release.

As previously reported, the company reached a restructuring support agreement with lenders holding over two-thirds of its outstanding term loans.

The company said in court documents that, despite strong core business performance, it has recently faced significant headwinds from inflation and macroeconomic volatility, which have driven up interest rates and energy prices.

The RSA contemplates a dual-track process through which the debtors can continue their prepetition marketing process in court for a potential sale of the business or a significant investment from a new investor, while simultaneously pursuing a debt-for-equity plan that may result in first-lien lenders owning 100% of the debtors’ reorganized equity.

DIP financing

The company has received a commitment for $200 million in debtor-in-possession financing from some of the term lenders, which is convertible into an exit facility upon the company's emergence from the court-supervised process.

The facility consists of a $150 million new-money term loan, a $36 million rollup of a prepetition bridge facility (plus interest, premiums and fees), and a $14 million transferred super-priority term loan facility.

The company is seeking interim access to $40 million of the new money and full access to the remaining amounts.

Wilmington Savings Fund Society, FSB is the agent.

The facility is set to mature in six months, subject to extension or earlier termination upon certain events.

Interest is SOFR plus 850 basis points.

There is a backstop fee of 6% on the new-money commitments and a 3% commitment fee on all DIP commitments.

The borrower will pay a maturity extension fee of 1% on each one-month extension.

This new financing is expected to provide sufficient liquidity to support Cyxtera during this process and beyond, the company said.

Treatment of claims

According to the RSA, on the plan effective date, holders of DIP claims will receive either their pro rata share of the first-out take-back debt facility or payment in full in cash.

Administrative claims and priority tax claims will be paid in full.

Other priority claims and other secured claims are unimpaired by the plan.

Holders of allowed first-lien claims, amounting to at least $966.44 million, will receive their pro rata share of (a) the second-out take-back debt facility and (b) 100% of the new common stock, subject to dilution on account of the recapitalization management incentive plan (MIP), the equity recovery stock component and any rights offering acceptable to the required consenting term lenders and the company.

Receivables facility claims are unimpaired.

Holders of general unsecured claims will receive, in the event of a recapitalization transaction, either reinstatement of their claims, payment in full in cash, or other recovery agreed to by the holder, required term lenders and the company. If a recapitalization transaction doesn’t close through the Chapter 11 process, the treatment will be determined by the required term lenders and company.

Section 510(b) claims will be canceled with no recovery.

Intercompany claims and intercompany interests will be reinstated or canceled with no distribution.

If a recapitalization transaction happens, holders of existing equity interests will receive their pro rata share of an equity recovery pool, which will be equal to the lesser of $20 million and 4.75% of plan equity value, subject to dilution on account of the MIP and any rights offering. Otherwise, equity interests will be canceled with no recovery.

Other details

The company has filed a number of customary motions with the court seeking authorization to support its operations, including the payment of employee wages, salaries and benefits without interruption.

Cyxtera intends to pay vendors and suppliers in full for goods and services provided on or after the filing date.

The company said it is continuing to evaluate its data center footprint, consistent with its commitment to optimizing operations.

The company’s subsidiaries in Germany, Singapore and the United Kingdom are not included in the court-supervised process.

In its petition, the company listed 5,001 to 10,000 creditors, $131 million in assets and $2.68 billion in debt.

Its largest unsecured creditors are Hitt Contracting Inc., based in Falls Church, Va., with a $3.53 million trade payable claim, Digital Realty, based in Dallas, with a $2.51 million trade payable claim, Menlo Equities, based in Menlo Park, Calif., with a $2.26 million trade payable claim, Cummins Sales and Service, based in Columbus, Ind., with a $2.24 million trade payable claim, and Lazard Freres & Co., based in New York, with a $1.5 million trade payable claim.

Kirkland & Ellis LLP is serving as legal counsel to Cyxtera, Guggenheim Securities, LLC is serving as financial adviser and AlixPartners, LLP is serving as restructuring adviser.

Cyxtera is a data center firm based in Coral Gables, Fla. The Chapter 11 case number is 23-14853.

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