Data center colocation provider Cyxtera files for bankruptcy

Colocation provider Cyxtera Technologies has filed for Chapter 11 bankruptcy after spending the last few months trying to find a buyer or reduce its debt load. The company will now attempt to restructure through bankruptcy or perhaps a suitor will come along to buy out the company.

Meanwhile, the company says it will be business as usual for its customers, but with the reorganization that comes with Chapter 11, it’s hard to say whether that will last, according to Bill Kleyman, an independent consultant to data-center companies.

The potential but unlikely risk for customers stems from Cyxtera’s reliance on data centers it leases from other providers—21 out of 60 sites.

“The horrible rabbit hole here is that if the people that are in charge with the bankruptcy proceedings come back and say you need to terminate these leases now,” Kleyman said. “If there are hosted workloads in [leased data centers], they’re gonna have to figure out a way to migrate those or to move them during this bankruptcy process.”

But that is the worst-case scenario, and there would likely be an orderly migration process. “The good news for general customers is that [Cyxtera is] not going to go away. I think they’re going to continue to support their customers,” he said.

Kleyman said that once Cyxtera goes through a restructuring, it is either going to come out financially healthier, or it’s going to find a buyer that wants its assets and/or acquire its customer base.

“For customers specifically, their stuff isn’t going to get shut down. They’re not going to experience any sort of disruption. These facilities are still very, very high-quality, high-class facilities,” he said.

Cyxtera is a significant business. It reported $746 million in business last year (although it still lost money), and its 60 locations around the world support 2,300 customers. It was formed in 2016 when a team of investors bought out the data-center business of CenturyLink for $2.15 billion.

In its most recent 10K filing with the Security and Exchange Commission, the company said, “We had a net loss of $355.1 million for the year ended December 31, 2022, and had an accumulated deficit of $1,576.5 million as of December 31, 2022. We have never been profitable and do not expect to generate positive net income until at least 2030.” Its stock collapsed from a high of $14 per share a few months ago to just six cents.

“Cyxtera expects to use the Chapter 11 process to strengthen the company’s financial position, meaningfully deleverage its balance sheet, and facilitate the business’s long-term success,” the company said in a statement.