Dive Brief:
- Managed services provider TPx filed for chapter 11 bankruptcy with the U.S. Bankruptcy Court for the Southern District of Texas on Saturday, seeking to wipe $1.1 billion in debt, according to court documents.
- Potential bidders have until Aug. 7 to make an offer to buy all or some of TPx's assets — with a “stalking horse” bidder setting the minimum price. TPx tapped investment bank PJT Partners last year to explore a sale but declined all nine bids it received, per a declaration by Portage Point Partners Managing Director Steven Shenker.
- The 575-person company said on its website that partners will see no impact to their contracts or sales commissions as a result of the proceedings. TPx owes $3.2 million of its debt to third-party firms and agents in its commission program, Shenker said in a filing.
Dive Insight:
Founded in 1998 as a telecom carrier named TelePacific, TPx has poured money into reinventing itself over the last decade — and taken on significant debt in the process.
TPx rebranded as a managed service provider in 2017, shedding its identity as a competitive local exchange carrier. In 2016, the firm’s acquisition of unified communications and managed IT company DSCI kicked off efforts to provide managed IT and cybersecurity services in addition to telecom aggregation and managed network services.
TPx’s pivot was heralded as a symbol of convergence between the IT and telecom industries. Many telecom peers have followed suit in the last decade, developing resale and service practices around Microsoft products and insisting that they be called MSPs rather than telecom aggregators.
It recently scored second in Channel Partners’ recent MSP 501 list, and it was Pax8's 2024 top North American partner for productivity. Shenker said the company enjoys positive adjusted EBITDA currently.
Growth hasn't kept up with the debt burden, according to Shenker. Private equity firm Siris Capital Group acquired TPxin 2020 and in 2022 contributed to a $70 million growth equity investment in the company. As part of the transaction, TPx refinanced its senior debt agreements in a “multi-year extension of maturities,” pushing the obligations back to 2026 and 2027. The idea was to give the MSP more runway to continue scaling, though it would owe approximately $300 million in payments in 2026, according to court documents.
The company has approximately $16.4 million of cash on hand and is set to run out of liquidity before the chapter 11 process ends, according to Shenker.
