Struggling Data Center Owner Lands $50M To Find Buyer And Hold Off Bankruptcy, For Now

Troubled data center provider Cyxtera has received a temporary lifeline from its lenders as it tries to find a buyer and stave off bankruptcy.

The Florida-based colocation provider, struggling with looming debt maturities and tanking stock price, announced last week that it has received $50M in financing from some of its existing lenders. But the infusion of liquidity comes with the condition that the firm finds a buyer or major investor in the coming months, otherwise ownership of Cyxtera will be transferred to its lenders.

“The terms of the [agreement] contemplate the Company undertaking a process to pursue a potential sale of the business or a significant investment from a new investor,” the company said in a written statement. “In connection with this process, the Lenders have agreed to offer long-term financing for potential investors to address existing near-term maturities.”

Cyxtera has a significant long-term debt burden set to mature this year and has been unsuccessfully seeking a buyer for months. As Bisnow previously reported, the company also planned to convert to a REIT structure last year in order to raise much-needed cash, although those plans were abandoned.

As no buyer materialized, Moody’s downgraded Cyxtera’s rating in February, declaring the company to be a “very high” credit risk. Meanwhile, the company's share price plummeted, and the company's value took a 28% hit just before the announced agreement with lenders.

The $50M capital injection comes from lenders who hold two-thirds of the company’s outstanding term loan, according to Cyxtera, and will allow the company to continue its ongoing business operations while it looks for a buyer. 

In connection with the new financing, Cyxtera has entered into a restructuring support agreement with those lenders, in which the company has agreed to find a buyer or major investor or transfer ownership to its lenders through Chapter 11 bankruptcy. Documents filed with the Securities and Exchange Commission indicate that Cyxtera has until August to accept a bid for the company’s acquisition but could be forced into Chapter 11 by its lenders as soon as next week. 

Cyxtera said in a statement it expects to determine a path forward under the RSA “in the coming weeks.” It’s a decision that will determine the fate of one of the world’s major colocation providers. Cyxtera operates 60 data centers globally — most of which it leases — and brought in around $746M in revenue last year. 

The company was founded in 2016 after a group of private investors purchased telecom CenturyLink’s data center portfolio and spun it off into its own colocation business, then went public via a special-purpose acquisition company, or SPAC, in 2021.

Regardless of Cyxtera’s path forward under the RSA, the company’s leadership say its data centers and services will continue operating normally for the foreseeable future. 

“We have strong momentum in our business, and demand for our global data center platform remains high,” Cyxtera CEO Nelson Fonseca said in a statement. “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. 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.”