The parent company of Emporia’s Birch Communications office has filed for Chapter 11 bankruptcy protection.
Fusion Connect and its American subsidiaries filed Monday, according to Bloomberg. Local staff began receiving letters to that effect recently.
Bloomberg says the current plan — unless something better comes along — is to have senior lenders owed almost $575 million to take over the company as part of a debt-for-reorganization plan to cut $300 million in debt. Fusion will hold an auction as it looks for a better deal.
Fusion Connect bought Birch in May 2018 for close to $600 million, including $50 million of Birch common stock, as well as term loans, the refinancing of over $440 million of Birch indebtedness and the development of a “revolving credit facility.” Fusion then divested its carrier services business to focus on cloud and business services. Bloomberg says Fusion borrowed $680 million as it acquired both Birch and MegaPath Cloud Company.
Bloomberg quoted Chief Financial Officer Keith Soldan as saying the Fusion business plan “was overly aggressive.” Soldan also said, “Missed revenue projections left the company with significantly less liquidity than originally anticipated.”
Besides the bankruptcy filing, spring 2019 has been active for the company. Fusion postponed its fourth-quarter and full-year 2018 financial results conference call in March to gain more time to complete an audit after the Birch acquisition, according to a company news release. In April, NASDAQ said it was delisting Fusion stock effective April 25 because it didn’t file its stakeholder report on time. In May, Fusion gained $20 million in bridge financing as it tried to restructure its debt with creditors and its controlling shareholder, according to the Wall Street Journal.
Before the current change in ownership, Birch had local layoffs in July 2016 and January 2017. In between, Birch was told to pay almost $2 million in repayments and over $4 million in civil penalties for deceptive marketing practices and for switching customer phone services without authorization or verification.
KVOE News is reaching out to local leaders and company executives for comment and a status report on the future of local operations.
