C1 Bankruptcy: $1.8 Billion in Debt, Company Partially Blames Avaya

C1 seeks to clear $1.2 billion in debt and projects a return to post-tax profit by 2027, according to its Chapter 11 bankruptcy filing.

Last week C1 said it reached agreement with most of its lenders and other stakeholders on a plan to reduce approximately 80% of the debt from its balance sheet. C1’s prepackaged Chapter 11 filing in the United States Bankruptcy Court for the Southern District of Texas allows it to pay vendors and employees in full while restructuring debt.

The Bloomington, Minnesota-based solution provider said it had more than $1.8 billion in debt, approximately $21.4 million in cash on hand, and $155 million in accounts payable. C1, which rebranded from ConvergeOne last November, has more than 3,000 employees and more than 6,000 customers worldwide.

According to the C1 bankruptcy filing, its management team and restructuring advisors “have worked diligently to develop a comprehensive strategy that will allow the company to access necessary funding and restructure its funded debt enabling the company to de-lever its balance sheet and position itself for future growth.”

C1 sells IT, communications and collaboration solutions to enterprise customers. Its focus areas include cloud, security and networking.

C1 also identified three challenges that led to Chapter 11:

The problems with Avaya led to lower sales and slowed development of C1 products and services, the filing said. The C1 bankruptcy filing said those factors depressed 2022 and 2023 sales. C1 reported revenues of approximately $1.5 billion for 2023, roughly the same as for 2022.

C1 took steps to cut costs, increase liquidity and improve its balance sheet throughout 2023. These measures included bringing in a new management team headed by CEO Jeffrey Russell in January 2023. It also reduced headcount and implemented other cost-cutting measures that it expects will result in more than $100 million in savings. C1 also received a series of loans in 2023 from PVKG Lender, which is controlled by C1’s majority owner, CVC. PVKG Lender provided approximately $160 million to C1 in 2023.

C1 Bankruptcy: Company Projects Profit by 2027

C1’s bankruptcy filing included financial projections through 2028, calling for steady non-GAAP income growth. C1 forecasts income of $864 million for the rest of 2024, increasing to $1.5 billion for 2025, $1.6 billion for 2026, $1.8 billion for 2027 and $1.9 billion for 2028. They forecast C1 will become profitable before tax in 2026, and profitable after tax in 2027. C1 projects a combined post-tax loss of $59 million from the rest of 2024 through 2026, followed by profit of $25 million in 2027 and $119 million in 2028.