Xtera Communications files for Chapter 11, seeks sale

Xtera Communications, which specializes in Raman amplification enabled optical transport systems for terrestrial and submarine networks, has filed for Chapter 11 protection with an eye toward selling the company. A stalking horse bidder for the company has been found.

Nov 18th, 2016

Xtera Communications, which specializes in Raman amplification enabled optical transport systems for terrestrial and submarine networks (see, for example, "TIM Brasil, Xtera deploy 100G over challenging G.653 DSF route" and "Xtera completes second repeatered undersea cable deployment"), has filed for Chapter 11 protection with an eye toward selling the company. A stalking horse bidder for the company has been found.

The company, including seven of its affiliates, asserted in a November 15 filing with the US Bankruptcy Court for the District of Delaware it has assets of approximately $50.47 million but debts of approximately $66.46 million owed to between 1,000 and 5,000 creditors. The company has been struggling with liquidity problems for the last nine months, according to the filings that included a declaration in support of the Chapter 11 petition from Xtera's CFO, Joseph R. Chinnici. After exploring various alternatives, the company decided to pursue Chapter 11 and a post-petition marketing and sale process.

"The Debtors do not have sufficient liquidity to continue operating outside of bankruptcy, and the pursuit of a sale transaction during these chapter 11 cases presents the best available option to maximize value for the Debtors' estates," Chinnici writes in his filing.

The company has reached agreement with Neptune Bidco, a unit of H.I.G. European Capital Partners, to provide a stalking horse bid for the company of $10 million, a figure that includes $7.4 million in senior debtor in possession financing. If all motions are approved, the Court will accept additional bids for the company. A similar procedure was in place when Ciena purchased the optical networking assets of bankrupt Nortel (see "Ciena becomes Nortel MEN stalking horse" and "Ciena closes Nortel acquisition").

Xtera was founded in 1998. It launched an IPO in November 2015 and its shares traded on NASDAQ under the symbol XCOM (see "Xtera IPO launches"). However, the company received a notice of delisting from NASDAQ on October 6, 2016, because Xtera had failed to regain compliance with NASDAQ Marketplace Listing Rule 5550(b), which is the continued listing requirement to maintain a total stockholders' equity of $2.5 million. The company's board decided not to fight the delisting notice, and its stock is now traded over the counter.

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