ConvergeOne went public in 2018, but was bought by a private equity firm less than a year later Photo courtesy of Nasdaq on Facebook

Bloomington-based IT services firm ConvergeOne has filed for Chapter 11 bankruptcy, the company announced late last week.

The company reported more than $1.5 billion in revenue last year — a roughly 5% increase compared to 2022. Despite the revenue growth, ConvergeOne has more than $1.6 billion in outstanding debt, according to court documents filed in U.S. Bankruptcy Court in the Southern District of Texas.

In a declaration before the court, ConvergeOne CFO Salvatore Lombardi said the company “has faced liquidity challenges due to a highly leveraged capital structure that has become unsustainable in the current interest rate environment.”

“The significant interest expense on the company’s funded debt—which increased by approximately $55 million on an annual basis from 2022 to 2023—combined with increased working capital needs over the same time period, has depleted the company’s liquidity and impaired its ability to operate in the ordinary course,” he said in the declaration.

ConvergeOne, which also goes by the brand name “C1,” has also “faced ongoing customer delays,” Lombardi said.  That has resulted in “shorter contract lengths and staggered and diversified purchasing of product and software, due to the financial challenges of one of the Company’s largest technology partners and an overall industry-wide slow-down in capital spending due to recessionary concerns, which have further exacerbated the company’s liquidity challenges,” he said.

As part of the filing, ConvergeOne aims to to transfer roughly 96% of its equity to to its top lenders, which the company is indebted to the tune of more than $1 billion, court documents said. The rest will go to its next largest lenders, which are owed about $275 million.

In a statement, ConvergeOne CEO Jeffrey Russell said the bankruptcy filing presents an opportunity for the company to build a “strong financial foundation for the future.”

“We are pleased to have reached this agreement to allow us to continue enhancing the resiliency of our business as a solutions-led company,” Russell said. “[ConvergeOne] is proactively taking steps to reduce our debt levels, strengthen our overall liquidity profile and, in turn, invest in near-term growth and grow market share.”

ConvergeOne employs roughly 3,000 people across 15 countries and has partnered with several Fortune 1,000 companies in the more than two decades since its creation, including Dell, Zoom and Farmer’s Insurance. The company went public in 2018. Not long after, private equity firm CVC Capital Partners assumed ownership the following year in a $1.8 billion deal.

Three years later, ConvergeOne had acquired seven other companies to bolster its digital infrastructure and IT solutions capabilities. However, CVC would lose its current equity shares under the potential financial restructure.

Under the company’s Chapter 11 agreement, ConvergeOne will gain more than $200 million in newly available loans.

“Our stakeholders’ confidence in [ConvergeOne] is a testament to our talented and results driven team and the power of our partnerships, which allow us to drive modernization and innovative outcomes for our customers,” Russell said.