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Bloomington-based IT company ConvergeOne has filed for Chapter 11 bankruptcy to eliminate 80% of its $1.8 billion in debt.
The plan, filed in Texas, would also transfer control of the company to senior lenders in the form of a 96% stake in ConvergeOne.
“[ConvergeOne] We are taking proactive steps to reduce our debt levels and strengthen our overall liquidity position to invest in near-term growth and expand market share,” CEO Jeffrey Russell said in a statement.
ConvergeOne has $21.4 million in cash on hand and generated more than $1.5 billion in revenue last year, according to the filing. Founded in 1993, the company has technology for business services, cybersecurity and customer engagement, with offices in New Jersey, India and Minnesota and more than 3,000 employees worldwide. The company plans to operate as usual during the bankruptcy proceedings.
Current economic conditions, including stubbornly high inflation, are a major factor in filing for bankruptcy.
“The company’s highly leveraged capital structure has resulted in significantly higher cash interest costs in the current interest rate environment,” the company noted in a disclosure statement filed in bankruptcy. “The company has been forced to transfer increasing amounts of cash, to pay for the increase in interest on its financing debt.”
ConvergeOne also outlined other issues weighing on earnings in its disclosure statement, including “customer delays due to the financial distress of one of its leading technology partners in the second half of 2022 and the first half of 2023.” The statement said that this resulted in “Customer contracts and product and software procurement models are intertwined and diverse.”
The company went public in 2018 through a merger with a special purpose acquisition company, but the following year an affiliate of Luxembourg-based private equity firm CVC Capital Partners acquired the company for $1.8 billion and took the company private again change.
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