According to US media reports, Cyxtera Technologies, Digital Core REIT’s second largest tenant and Mapletree Industrial Trust ME8U ’s third largest tenant, has received six letters of intent (LOI) to acquire it. Cyxtera is also a tenant of Keppel DC REIT in Europe.
On June 4, Cyxtera voluntarily filed for Chapter 11 bankruptcy relief and is seeking court approval for a series of steps to sell or attract investment for its reorganised assets, US media report. According to Dgtl Infra Real Estate 2.0, the process involves setting up marketing, auction and bidding procedures aimed at identifying the highest or most beneficial offers, with the ultimate goal of maximising value for its first lien lenders.
In March 2023, Cyxtera initiated a marketing process, led by investment banker Guggenheim Securities, with the aim of identifying third parties interested in a potential sale transaction, reports Dgtl Infra. Simultaneously, the company was engaged in negotiations with first lien lenders to facilitate a comprehensive restructuring transaction.
As part of the bankruptcy protection process, more than 75 potential partners were contacted to gauge their interest in acquiring either some or all of Cyxtera’s assets. Of these, 37 signed non-disclosure agreements (NDAs) and six submitted non-binding LOIs.
The bidding procedures will create further opportunities to market the sale of Cyxtera’s assets, receive additional bids, and, if necessary, hold an auction. This strategy aims to garner additional interest and secure the highest recovery possible for all stakeholders, the US news media say.
Based on the schedule, the deadline by which Cyxtera may choose a Stalking Horse Bidder is July 16, and all bids should be received by July 19. An auction – if one is needed – should be held by July 24. Cyxtera will file on the docket a notice identifying the successful bidder, assets and key terms of the agreement, and the process is scheduled to be completed by Sept 24.
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According to DBS Group Research, Cyxtera is likely to reject unexpired leases at two of its data centres, in Amsterdam and Moses Lake (US), to save on US$114 million ($152.9 million). The bankruptcy process allows the rejection of any ongoing contract or unexpired lease with court approval. Neither of these properties is owned by the S-REITs.
Cyxtera went public via a spac in 2021. The company combined with the Nasdaq-listed Starboard Value Acquisition Corp in a US$3.1 billion deal. Within a year, market observers suggested that the company was looking to go private.
Cyxtera operates more than 60 facilities totalling more than 245MW across 29 markets globally; the majority of its portfolio is leased.
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However, the sharp rise in interest rates caused Cyxtera’s annualised interest expense to balloon from US$35.9 million in 1Q2022 to US$75.7 million in 1Q2023. The company has just over US$1 billion in debt maturing in April and May 2024.
In a note dated June 21, DBS says the worst is over for DC REIT, while maintaining its “buy” rating for the stock with a price target of US$0.90.
