Cyxtera Files Plan of Reorganization and Provides Business Update for the Second Quarter 2023

Rhea-AI Summary

Cyxtera has reached a key milestone in its Chapter 11 process by filing a proposed Plan of Reorganization. The proposed plan, supported by the company's lenders, aims to optimize the capital structure and reduce pre-filing funded debt by over $950 million. The plan provides flexibility for a balance sheet recapitalization or a sale of the business. In the second quarter of 2023, Cyxtera delivered solid growth in total revenue, recurring revenue, core revenue, and transaction adjusted EBITDA. Final bids for the sale process are due on August 18, 2023.

Positive

• Cyxtera's proposed Plan of Reorganization aims to reduce pre-filing funded debt by over $950 million, providing enhanced financial flexibility.
• In the second quarter of 2023, Cyxtera experienced solid growth in total revenue, recurring revenue, core revenue, and transaction adjusted EBITDA.
• The company's court-supervised process is on track to be completed by the fall of this year.

Negative

• None.

Reaches Agreement with Lenders to Optimize Capital Structure and Reduce Pre-Filing Funded Debt by More Than $950 Million

Delivered Solid Growth in Total Revenue, Recurring Revenue, Core Revenue and Transaction Adjusted EBITDA

Negotiations Around Sale Alternative Remain Active, with Final Bids Due August 18, 2023

MIAMI--(BUSINESS WIRE)-- Cyxtera (OTC: CYXTQ), a global leader in data center colocation, interconnection services and digital infrastructure, today announced that it has reached a key milestone in its Chapter 11 process by filing a proposed Plan of Reorganization (the “Plan”) with the U.S. Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”). The company also released a business update for the quarter ended June 30, 2023.

The proposed Plan is supported by certain of Cyxtera’s lenders who collectively hold over two-thirds of the Company’s outstanding first lien debt (the “Lenders”) and are parties to Cyxtera’s previously announced Restructuring Support Agreement. The proposed Plan provides flexibility for the Company to pursue a balance sheet recapitalization or a sale of the business. If the proposed Plan is approved and a recapitalization is consummated, the Lenders have committed to support a holistic restructuring of the Company’s balance sheet. Such a restructuring would eliminate more than $950 million of Cyxtera’s pre-filing debt and provide the Company with enhanced financial flexibility to invest in its business for the benefit of its customers and partners. In either a recapitalization or sale scenario, the Company remains on track to emerge from the court-supervised process no later than the fall of this year.

Nelson Fonseca, Cyxtera’s Chief Executive Officer, said, “We continue to make important progress in our court-supervised process, while demonstrating solid performance across our business. Filing this Plan with the support of our Lenders provides us a path to emerge in a significantly stronger financial position. I want to thank our dedicated team and our customers and partners for their ongoing support.”

Final bids from interested parties in the sale process are due on August 18, 2023. The Company has received multiple qualified bids to date.

Q2 2023 Financial and Business Update

Cyxtera today also provided a financial and business update for the quarter ended June 30, 2023, which demonstrates significant strength in the Company’s financial position as it continues to grow and provide first-class service to its customers.

Carlos Sagasta, Cyxtera’s Chief Financial Officer, said, “We are pleased to have delivered another quarter of solid growth across the business, underscoring the strength of our offering and the value we create for our global customers. We expect to continue building on this momentum as we successfully complete the process to strengthen our financial position for the long term.”

Preliminary Financial Highlights (unaudited)

• Total revenue increased by $14.9 million, or 8.1% year over year, to $199.0 million in the second quarter.
• On a constant currency basis, total revenue increased by $15.1 million, or 8.2% year over year.
• Recurring revenue increased by $15.8 million, or 9.1% year over year, to $190.0 million in the second quarter.
• Core revenue increased by $17.4 million, or 10.3% year over year, to $186.2 million in the second quarter.
• Transaction Adjusted EBITDA increased by $6.4 million, or 10.7%, to $66.4 million and increased by $6.5 million, or 10.9% year over year, on a constant currency basis, in the second quarter.

Additional Information

Additional information regarding the Company’s court-supervised process is available at www.CyxteraRestructuring.com. Court filings and other information related to the proceedings are available on a separate website administrated by the Company’s claims agent, KCC, at www.kccllc.net/cyxtera; by calling KCC toll-free at (877) 726-6510, or (424) 236-7250 for calls originating outside of the U.S. or Canada; or by emailing KCC at cyxterainfo@kccllc.com.

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

About Cyxtera

Cyxtera is a global leader in colocation, interconnection services, and digital infrastructure. With IT infrastructure becoming increasingly hybrid, complex, and distributed, Cyxtera continues to expand its portfolio beyond space and power to deliver more cloud-like and flexible infrastructure solutions across its global data center platform and robust partner ecosystem. Today, Cyxtera provides more than 2,300 enterprise and government customers with the technology solutions they need to scale faster, achieve financial goals, and gain a competitive advantage. For more information, please visit www.cyxtera.com.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the federal securities laws. Because forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of Cyxtera’s control. Actual results and conditions (financial or otherwise) may differ materially from those indicated in the forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results and conditions to differ materially from those indicated in the forward-looking statements, including, but not limited to, risks and uncertainties relating to Cyxtera’s Chapter 11 cases (the “Chapter 11 Case”), including, but not limited to, Cyxtera’s ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Case, the effects of the Chapter 11 Case on Cyxtera and on the interests of various creditors, stockholders and other constituents; Bankruptcy Court rulings in the Chapter 11 Case and the outcome of the Chapter 11 Case in general; the length of time the Company will operate under the Chapter 11 Case; risks associated with third-party motions in the Chapter 11 Case; the potential adverse effects of the Chapter 11 Case on the Company’s liquidity or results of operations and increased legal and other professional costs necessary to execute the reorganization; uncertainty associated with evaluating and completing any strategic or financial alternative as well as Cyxtera’s ability to implement and realize any anticipated benefits associated with any alternative that may be pursued; the impact of any challenge by creditors or other parties to previously completed transactions; the consequences of the acceleration of the Company’s debt obligations; and any other statements regarding plans, objectives, expectations and intentions and other statements that are not historical facts. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the “Risk Factors” disclosed in Cyxtera’s filings with the SEC from time to time. There may be additional risks that Cyxtera does not presently know or that it currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Cyxtera’s expectations, plans or forecasts of future events and views as of the date of this press release. Accordingly, you should not place undue reliance upon any such forward-looking statements in this press release. Neither Cyxtera nor any of its affiliates assume any obligation to update this press release, except as required by law.

Statement Regarding Non-GAAP Financial Measures

This press release contains Transaction Adjusted EBITDA, which is a supplemental measure that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). Transaction Adjusted EBITDA represents the measure of EBITDA disclosed to Starboard Value Acquisition Corp. (“SVAC”) in connection with its consideration of the business combination transaction between SVAC and Cyxtera. Cyxtera defines Transaction Adjusted EBITDA as net income (loss) before the following items: depreciation and amortization, interest and other expenses, net, income tax expense (benefit), equity-based compensation, straight-line rent adjustment, amortization of favorable / unfavorable leasehold interest & asset retirement obligation accretion, stand-up separation & other, restructuring costs & other, and change in fair value of warrant liabilities. As a non-GAAP financial measure, Transaction Adjusted EBITDA excludes items that are significant in understanding and assessing Cyxtera’s financial results or position. Therefore, this measure should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that Cyxtera’s presentation of this measure may not be comparable to similarly-titled measures used by other companies. You should review these measures to the most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate Cyxtera’s business.

This press release includes constant currency revenue and Transaction Adjusted EBITDA, which are non-GAAP financial measures and are not meant to be considered in isolation or as an alternative to GAAP revenue and GAAP net income (loss). Cyxtera has presented these non-GAAP financial measure to provide investors with an additional tool to evaluate its results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Cyxtera’s business performance. To present this information, Cyxtera’s current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230806533902/en/

Media Inquiries

Janice Clayton

press@cyxtera.com

Aaron Palash / Meaghan Repko / Aura Reinhard

Joele Frank, Wilkinson Brimmer Katcher

(212) 355-4449

Investor Inquiries

Kwang Edeker

IR@cyxtera.com

Source: Cyxtera

FAQ

What is the key milestone that Cyxtera has reached in its Chapter 11 process?

Cyxtera has reached a key milestone by filing a proposed Plan of Reorganization.

What does the proposed Plan of Reorganization aim to achieve?

The proposed plan aims to optimize the capital structure and reduce pre-filing funded debt by over $950 million.

What options does the proposed Plan provide for the company?

The proposed Plan provides flexibility for a balance sheet recapitalization or a sale of the business.

What were the financial highlights for Cyxtera in the second quarter of 2023?

In the second quarter, total revenue increased by 8.1% year over year, recurring revenue increased by 9.1% year over year, core revenue increased by 10.3% year over year, and transaction adjusted EBITDA increased by 10.7%.

When are the final bids for the sale process due?

The final bids for the sale process are due on August 18, 2023.