Fusion Connect Consulted Windstream on Bankruptcy Approach

Master agents have concerns, including Fusion saying it's open to being acquired.

Edward Gately, Senior News Editor

June 7, 2019

4 Min Read

Fusion Connect’s partners are keeping a close eye on its chapter 11 bankruptcy filing and hope it will emerge a stronger company.

This week, Fusion became the latest company in the channel to file for chapter 11 after its acquisitions of MegaPath and Birch Communications’ cloud and business-services business failed to meet performance projections.

Senior lenders, owed about $574 million, could take over the company under a proposal to slash debt by $300 million unless a court-supervised auction prompts a more lucrative deal. A bid procedure motion will outline the sale process, and Fusion‘s management team and advisers will consider bids for its U.S. and/or Canada operations, but Fusion won’t sell off individual assets. The court then would approve the sale.

Fusion borrowed $680 million, including the senior lender loans, to acquire Birch and MegaPath last year.


Sandler Partners’ Alan Sandler

Alan Sandler, managing partner at Sandler Partners, tells Channel Partners that Fusion is doing a good job overall of providing a positive message to their partners and larger customers, but there’s still valid concern. At this point, he’s optimistic that Fusion will exit the bankruptcy, and continue to support customers and partners.

“Anytime a carrier goes into chapter 11 bankruptcy protection, it’s a concern because the bankruptcy judge or trustee has ultimate authority on the approval processes for debtholders, operations or payment of commissions,” he said. “We know the Fusion channel team is saying all the right things and seems to have the best intentions to support customers and continue to pay agents their commissions. We also know the Fusion team has spoken with the Windstream team to see how they approached processes, such as continuing to take care of customers, getting approval to pay master agents and working with the creditors. Additionally, Fusion channel management says the creditors are working with them to help them through the process. These are all very good steps.”

Here’s a timeline of Windstream’s bankruptcy, the biggest story of the year thus far in the channel.

However, there are still concerns, namely because Fusion has said it is open to being acquired, Sandler said.

“This has various implications in the following scenarios,” he said. “If an outside operator acquires Fusion, they could continue to run the company as is, or could make changes. If the debtholders acquire Fusion, they could continue to run the company as is, or they could cut expenses and let it run out. If a liquidator acquires Fusion, they could break it up and sell off the parts.”

When it comes to customers, Sandler Partners has many large multilocation customers that have expressed “legitimate and significant” concerns about what could happen, Sandler said. Some are asking for backup plans in case a ruling from the bankruptcy court affects their ongoing business operations, he said.

“Additionally, when a company is in reorganization, employees – from management to the trenches – are concerned with their positions and futures,” he said. “Sometimes that negatively impacts work processes, support levels and provisioning times.”

Nancy Ridge, executive vice president of Technology Source, said Fusion was one of her company’s first hosted PBX providers, and from the very beginning it demonstrated a commitment to the channel and the customer, doing whatever it took to create a positive customer experience.

She hopes the outcome of chapter 11 will be …

… a “better, stronger” Fusion.


Technology Source’s Nancy Ridge

“The chapter 11 filing is an unfortunate situation,” Ridge said. “The announcement came after several weeks of Fusion seeking solutions for the outcomes of an aggressive acquisition strategy. During those weeks, and starting with meetings at the Channel Partners Conference and Expo, the Fusion management team has been forthright, transparent and responsible in not only keeping us informed, but more importantly reassuring us of their commitment and ability to pay commissions without interruption. Because they’ve handled it with us so directly, we’ve been able to pass it on to our partners the same way.”

Technology Source hasn’t had any questions from customers, Ridge said. Customers are less concerned with chapter 11 filings than is the partner community, she said.

“We tell them they should not expect any degradation of services and that, as trusted advisers, we will continue to stay informed and keep them appraised should there be any cause for concern,” she said. “We’ve already seen this process create a renewed commitment to the channel. The regular, open communication sets a precedent for future discussions centered on growing our businesses, which is everyone’s objective.”

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About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

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