Brookfield Infrastructure Partners L.P., one of the largest owners and operators of critical global infrastructure networks, has thrown Cyxtera, a distressed American data center colocation and digital infrastructure firm, a US$ 775 Million lifeline.
Readers would recall that in June 2023, Florida-based Cyxtera had filed for bankruptcy before a New Jersey court under Chapter 11, due to mounting debts and severe funding crunch. At that point, it ran as many as 60 data centers in 30 markets, with subsidiaries in Germany, Singapore and UK. These subsidiaries though are not part of the deal with Brookfield.
Cyxtera was listed on NASDAQ in 2021, but since then its share price tanked by nearly 90 percent, and it with liabilities piling up, Cyxtera ended up owing money to as many as 5,000 creditors. The Asset Purchase Agreement (APA) with Brookfield will allow enable Cyxtera to strengthen its financial health and business position in the long run.
According to an official statement released by Cyxtera, “In connection with the APA and the court supervised process, Brookfield will purchase from several landlords the real estate at which seven of Cyxtera’s U.S. data centers are located. These transactions will allow Cyxtera to increase existing facility ownership, secure expansion opportunities in support of robust customer demand, and strengthen its data center platform by giving Cyxtera more control over its cost structure.”
“We are pleased to reach this agreement with Brookfield, which represents a favorable path forward for our customers, partners, and employees,” said Nelson Fonseca, Cyxtera’s Chief Executive Officer, adding, “This agreement and the changes to the data center portfolio, most importantly our increased facility ownership, will enable us to build on our business momentum and better position Cyxtera for the future.”
The statement further explains, “Among the transactions made in connection with the APA is a comprehensive agreement with Digital Realty Trust, Inc. (NYSE: DLR) and Digital Core REIT (SI: DCRU) for Brookfield to acquire the real estate supporting several of Cyxtera’s U.S. data centers. Separately, Cyxtera has entered into an agreement with its landlord, Digital Realty, to amend the terms of its current leases at three U.S. sites and three international sites, to allow Cyxtera to exit those sites in 2024 while providing a seamless transition for customers.”
Cyxtera is also selling off its Canadian data centers. It said in a press release, “Cyxtera has signed an agreement to sell its business in its Montreal and Vancouver data centers to Cologix.”
The full terms of the APA have been filed with the US Bankruptcy Court for the District of New Jersey. The hearing to approve the Company’s Chapter 11 plan and transaction with Brookfield is scheduled for November 16, 2023. In addition to court approval, the APA is subject to regulatory approval and customary closing conditions. The transaction with Brookfield is expected to close in the first quarter of 2024.