Update: Zenith Infotech Negotiating Debt With Bondholders
Zenith Infotech, the cloud computing company that works closely with MSPs, has confirmed that it defaulted on its $33 million foreign currency convertible bonds (FCCBs), which were due Sept. 21, according to Reuters. Zenith Infotech remains in negotiations with the bondholders to extend the time for repayment, Reuters added. So what exactly does this mean for managed services providers that work with Zenith Infotech? Here’s some perspective.
First, let’s not press the panic button. Defaulting on a bond payment certainly isn’t good news. But I previously worked for a major media company that sat down with its bondholders, discussed an upcoming payment that couldn’t be met, then renegotiated the debt to the satisfaction of the bondholders. It was a stressful situation, but customer service remained strong throughout the negotiations.
Still, I don’t have firsthand knowledge of Zenith Infotech’s current situation — so some facts about the situation remain beyond my reach. I’ve requested comment from Zenith Infotech’s U.S. and India offices but have yet to receive a reply. That said, I believe Zenith Infotech continues to march forward with its SmartStyle cloud computing and business continuity strategy. If/when I receive an official comment from Zenith Infotech, I will return with a new blog post or comment area update.
Meanwhile, I also have questions for Zenith RMM, which spun-off from Zenith Infotech in September. As part of that process, Summit Partners — a private equity firm — invested in Zenith RMM. Published reports in India suggest Zenith Infotech has “received all monies due from Zenith RMM, LLC except for the amount to be held in escrow, part of which the Company plans to utilize for partial repayment of FCCBs [bonds].”
I am not suggesting that Zenith RMM will be impacted by Zenith Infotech’s attempt to renegotiate its debt with bondholders. But I am reaching out to Zenith RMM for comment and potential perspective on the situation, so that MSPs have a clear view of situation as they mull their RMM (remote monitoring and management), NOC and cloud services strategies.
Over the past year, Zenith Infotech shares have fallen from 271.95 to 83.90 on the Bombay Stock Exchange. In a statement to the exchange, Zenith said that company managers “have not in last one year bought or sold any shares of the Company.” Read between the lines, and Zenith is clearly stating that company insiders were not dumping shares ahead of the current bond renegotiation.
Separately, Zenith Infotech has a sister company called Vu Telepresence. I don’t know if Vu has a financial relationship with Zenith Infotech, but I’ve sent Vu a note seeking potential comment as well.
If/when I have info to share I’ll be back with updates.