GTT Communications, a global enterprise and dark fiber provider, today announced that it has entered into a Restructuring Support Agreement (RSA) with holders of a majority of its secured and unsecured debt and I Squared Capital, an infrastructure private equity firm, to implement a restructuring of the company’s remaining balance sheet, via the Chapter 11 bankruptcy process, following completion of the pending $2.15bn sale of its infrastructure division.

Notably, GTT Communications anticipates completing the previously announced infrastructure division sale to I Squared Capital in the coming weeks.

GTT Communications – Chapter 11 Bankruptcy

Upon completion of the sale of the company’s infrastructure division, GTT Communications and its subsidiaries based in the United States, will commence a prepackaged Chapter 11 process, in the United States Bankruptcy Court for the Southern District of New York. However, GTT’s foreign businesses and operations outside of the United States are not included in the Chapter 11 filing.

Debt Reduction

GTT Communications’ prepackaged Chapter 11 bankruptcy process aims to de-lever GTT’s post-sale capital structure. However, prior to this process beginning, GTT’s infrastructure division sale to I Squared Capital will allow the company to repay an initial $1.66bn of its secured debt.

GTT Communications Illustrative Estimated As Adjusted Capital Structure

Furthermore, a combination of the Restructuring Support Agreement (RSA) transactions and receipt of deferred consideration from the infrastructure division sale will allow GTT Communications to pay a further ~$1.1bn of the company’s debt. Therefore, GTT intends to reduce its debt by a total of ~$2.8bn and emerge from this Chapter 11 bankruptcy process.

Timing

As part of the company’s Key Assumptions for its cash flow forecast, GTT notes the following indicative events:

  • Chapter 11 Filing: GTT makes the Chapter 11 filing on September 30, 2021
  • Chapter 11 Plan of Reorganization: becomes effective in March 2022

Operations

GTT intends to operate and serve its customers in the United States and around the world without interruption. To this end, GTT will reserve cash from the sale proceeds of its infrastructure division to strengthen the company’s liquidity.

Strategy

Following divestment of its infrastructure division, GTT Communications will re-position the business into a managed services provider. The company’s strategy will focus on serving enterprises with cloud networking services across a range of wide area network (WAN) connectivity options. Specifically, this includes GTT’s Tier 1 global IP network, SD-WAN, Ethernet, MPLS, SIP Trunking, and security.

GTT Communications – Financial Overview

GTT Communications disclosed updated financials, which still remain estimates for full-year 2020. As shown below, for 2020, the company estimates revenue of $1.7bn, a 3.5% decline year-over-year, and adjusted EBITDA of $320m, a 27% decrease year-over-year. Therefore, the company’s EBITDA margin was 19% in 2020E, a 6% decline year-over-year.

GTT Communications Revenue and Adjusted EBITDA

Additionally, the company provided updates on its recurring revenue mix by customer type, service offering, and geography.

GTT Communications Customer Type Service Offering Geography

Transaction Advisors

GTT Communications’ restructuring advisor, including for the Chapter 11 bankruptcy process, was Alvarez & Marsal. Additionally, GTT Communications’ investment banker was TRS Advisors (part of Piper Sandler). Finally, GTT Communications’ legal advisor for the restructuring was Akin Gump Strauss Hauer & Feld.

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