U.S. TelePacific Corp. - Chapter 11 Case Summary

Business Description

Headquartered in Austin, TX, U.S. TelePacific Corp., together with its Debtor and non-Debtor affiliates (collectively, the "Company"), is a national provider of managed IT services to business customers across the United States. Operating as a Managed IT Services Provider ("MSP"), the Company delivers integrated technology solutions spanning connectivity and networking, cybersecurity, unified communications, and information technology infrastructure services.

• Through a recurring-revenue, services-based model, the Company enables small and mid-sized enterprises to operate secure, reliable, and scalable IT and network environments.
• Its solutions are mission-critical to customers' daily operations, supporting network connectivity, voice and unified collaboration, and cybersecurity across thousands of business locations nationwide.

The Company serves approximately 11,000 customers operating primarily across the fifty states, spanning a wide range of industries that includes healthcare, financial services, legal, retail, manufacturing, education, government, and non-profit organizations.

The Company is supported by approximately 575 employees who work either on premises at its office locations or remotely throughout the United States. Its operations are further supported by hundreds of independent contractors and approximately 50 employees of a non-Debtor affiliate in Ireland, which provides back-office operational support primarily comprised of customer and IT-related support.

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Corporate History

The Company was founded in 1998 in California as TelePacific Communications, operating primarily as a Competitive Local Exchange Carrier ("CLEC") that provided telecommunications connectivity services to small and mid-sized business customers in California. Through a combination of organic growth and strategic acquisitions, the Company expanded its service offerings and geographic footprint over time, evolving from a regional telecommunications provider into a nationwide managed services provider delivering a broad set of critical IT and communications services.

Expansion Through Acquisitions

• NextWeb (2010): The Company's first expansion beyond California, enabling it to provide additional broadband and enterprise connectivity services in Nevada as well as California.
• Tel West Communications (2011): Established a presence in Texas and added thousands of small and mid-sized business customers in that market.
• DSCI (2016): A managed services provider headquartered in Massachusetts, this acquisition marked a significant milestone in the Company's evolution—expanding its customer base in the northeastern United States and adding unified communications and managed IT capabilities that significantly broadened its service offerings.

Today, the Company supports distributed customers across virtually every region of the country. While it maintains historical customer concentrations in the markets where it originally operated—particularly California, Texas, and the Northeast—its managed services platform enables it to serve customers nationwide.

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Operations Overview

The Company operates as a Managed IT Services Provider focused on delivering integrated technology solutions that enable businesses to design, deploy, and manage business-critical networking, cybersecurity, unified communications, and IT infrastructure through a single provider. This model is designed to help customers simplify complex technology environments, support distributed and hybrid workforces, and maintain secure and reliable network connectivity.

The Company's business is built around four core service categories, delivered as subscription-based services that are embedded in customers' day-to-day operations and generate recurring revenue across multiple service lines:

Managed Connectivity and Networking

The Company's largest and most business-critical service portfolio, providing the underlying infrastructure that delivers business internet and networking to support business applications, employee devices, and cloud applications. These services frequently serve as the foundational layer upon which the Company delivers its other managed services.

• Offerings include software-defined wide area networking ("SD-WAN"), dedicated internet access, Ethernet transport services, private networking solutions, and other enterprise-grade connectivity.
• The Company designs, deploys, and manages networks that link multiple customer locations, support work-from-home employees, and deliver secure access to cloud-based systems—while providing ongoing monitoring, optimization, and troubleshooting to ensure uptime, consistent performance, and reliability.

Cybersecurity Solutions

Designed to protect customer networks, systems, and data from increasingly sophisticated cyber threats, these services integrate with the Company's connectivity and IT management platforms to enable continuous monitoring and real-time threat response.

• Offerings include Secure Access Service Edge ("SASE"), managed firewall and network security, endpoint protection, email and web security, threat monitoring, and incident detection and response.
• The Company also provides security awareness training and related compliance support to help customers address regulatory and data protection requirements applicable to their industries.

Unified Communications

The Company provides cloud-based unified communications services that integrate voice, messaging, video, conferencing, and collaboration tools into a single platform accessible across devices and locations, enabling customers to replace traditional on-premises telephone systems with cloud-delivered platforms that support hybrid and remote work.

• Offerings typically include hosted Voice over Internet Protocol ("VoIP") telephony, video conferencing, team collaboration applications, and cloud-based contact center functionality.
• The Company also provides business-critical call and contact center capabilities used by clients to offer multi-modal sales, support, and service via phone, SMS, and chat.

Managed Infrastructure and IT Services

A broad range of managed IT services designed to support and maintain customers' core technology environments. For many small and mid-sized enterprises that lack the resources to maintain dedicated internal IT staff, the Company functions as an outsourced IT department responsible for day-to-day technology operations and keeping critical business functions running.

• Services commonly include monitoring and management of critical internet and network infrastructure, server and endpoint management, device lifecycle management, cloud migration and management, backup and disaster recovery, and remote help desk support.
• The Company also assists customers with the deployment and administration of widely used productivity platforms such as Microsoft 365 and other cloud-based enterprise applications.

Together, these four service categories form an integrated platform that enables the Company to provide end-to-end technology management for its customers—combining networking, cybersecurity, communications, and IT infrastructure management into a unified managed services model that simplifies complex technology environments while generating stable, recurring revenue across its core offerings.

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Prepetition Obligations

As of the Petition Date, the Debtors report approximately $1.1 billion in total funded debt obligations, inclusive of all outstanding principal plus accrued PIK and unpaid cash interest, with approximate amounts outstanding shown as of June 28, 2026. The Company’s prepetition capital structure is summarized below:

Funded Debt Summary

• Superpriority Term Loan Facility: ~$22 million (matures July 2026).
• First Lien Term Loan Facility: ~$421 million (matured May 2026).
• Revolving Credit Facility: ~$5 million (matured November 2025).
• Second Lien Term Loan Facility: ~$658 million (matures November 2026).
• Third Lien Term Loan Facility: ~$33 million (matures May 2027).

Capital Structure Overview

• The Company’s existing capital structure took shape through a series of financing and restructuring transactions completed prior to these Chapter 11 Cases:
  • 2022 Transaction: In February 2022, the Company secured a $70 million growth equity investment led by Siris Capital Group, LLC to support its growth strategy and technology transformation—spanning technology infrastructure, customer experience, service excellence, and digital and channel partner capabilities. In connection with the investment, the Company also refinanced its senior debt on more favorable terms, including a multi-year extension of maturities.
  • 2023 Restructuring Transactions: With significant funded debt still in place, in 2023 the Company and certain lenders—including members of the Ad Hoc Group—completed a further out-of-court restructuring to provide new capital and extend maturities into 2026 and 2027 (together with the 2022 Transaction, the “Initial Restructuring Transactions”).
    • Beforehand, the Company’s funded debt consisted primarily of the Prior First Lien Credit Facility, comprising an initial ~$580 million term loan facility and an initial ~$25 million revolving credit facility.
    • The transaction up-tiered 50% of existing first lien holdings into a new super-senior facility—the current First Lien Term Loan Facility.
    • The Consenting Investor purchased the remaining 50% of first lien holdings at a discount and subordinated them to the participating lenders, forming the current Second Lien Term Loan Facility, which also included an approximately $65 million new capital infusion from the Consenting Investor at closing.
    • Participating lenders received additional consideration equal to roughly 5.0% of their Prior First Lien Credit Facility holdings through the current Third Lien Term Loan Facility.
    • One lender declined to participate, leaving its holdings outstanding as a stub position under the Revolving Credit Facility.
  • Superpriority Bridge Financing: Amid the 2025–2026 Marketing and Sale Process and broader Restructuring Transactions discussions, the Company negotiated additional bridge financing with the Ad Hoc Group and the Consenting Investor, resulting in the Superpriority Term Loan Facility—without which the Company would have lacked sufficient funds to meet certain operational expenses or to complete the Marketing and Sale Process.

Superpriority Term Loan Facility

• Certain of the Debtors are party to the Superpriority Credit Agreement, dated March 18, 2026, with U.S. TelePacific Corp. as borrower, U.S. TelePacific Holdings Corp. (“TPx Holdings”) as parent guarantor, the subsidiary guarantors and lenders party thereto, and Wilmington Savings Fund Society, FSB as administrative and collateral agent.
  • The facility provides for an initial commitment of up to a $20 million delayed draw term loan and is secured by liens on substantially all of the Debtors’ assets.
  • Approximately $22 million is outstanding as of the Petition Date. The facility also carries a 1.75x multiple on invested capital (MOIC), which is not reflected in the outstanding balance shown above.

First Lien Term Loan Facility

• Certain of the Debtors are party to the First Lien Senior Secured Credit Agreement, dated June 1, 2023, with U.S. TelePacific Corp. as borrower, TPx Holdings as parent guarantor, the subsidiary guarantors and lenders party thereto, and Wilmington Savings Fund Society, FSB as administrative and collateral agent.
  • The facility provides for an initial commitment of up to approximately $332 million delayed draw term loan and is secured by liens on substantially all of the Debtors’ assets.
  • Approximately $421 million is outstanding as of the Petition Date. The Debtors have entered into forbearance agreements under which the lenders agreed to forbear from taking certain actions related to certain events of default, including the facility’s maturity.

Revolving Credit Facility

• Certain of the Debtors are party to the Credit Agreement dated February 15, 2022 (as amended by Amendment No. 1 dated June 1, 2024), with U.S. TelePacific Corp. as borrower, TPx Holdings as parent guarantor, the lenders party thereto, and Wilmington Savings Fund Society, FSB as administrative and collateral agent.
  • As a consequence of the 2023 Restructuring Transactions, the agreement provides for up to a $5 million revolving credit facility. The lender that did not participate in the restructuring retained its remaining revolving loans from the Prior First Lien Credit Facility under this agreement.
  • The facility is secured by liens on substantially all of the Debtors’ assets. Approximately $5 million remains outstanding as of the Petition Date, notwithstanding the facility’s November 2025 maturity.

Second Lien Term Loan Facility

• Certain of the Debtors are party to the Second Lien Senior Secured Credit Agreement dated June 1, 2023, with U.S. TelePacific Corp. as borrower, TPx Holdings as parent guarantor, the subsidiary guarantors and lenders party thereto, and Wilmington Savings Fund Society, FSB as administrative and collateral agent.
  • The facility provides for an initial commitment of up to approximately $397 million delayed draw term loan and is secured by liens on substantially all of the Debtors’ assets.
  • Approximately $658 million is outstanding as of the Petition Date.

Third Lien Term Loan Facility

• Certain of the Debtors are party to the Third Lien Senior Secured Credit Agreement dated June 1, 2023, with U.S. TelePacific Corp. as borrower, TPx Holdings as parent guarantor, the subsidiary guarantors and lenders party thereto, and Wilmington Savings Fund Society, FSB as administrative and collateral agent.
  • The facility provides for an initial commitment of up to approximately $33 million delayed draw term loan and is secured by liens on substantially all of the Debtors’ assets.
  • Approximately $33 million is outstanding as of the Petition Date.

Receivables Purchase Agreements

• Separate from its funded debt, the Company has funded ordinary-course operations through the sale of certain accounts receivable pursuant to (a) a Restated Receivables Purchase Agreement dated February 11, 2020, between Parent and Tango Stockholder Holdings, LLC, and (b) an Amended and Restated Receivables Purchase Agreement dated June 1, 2023, between Parent and Tango Private Investments, LLC (collectively, the “Receivables Purchase Agreements”; the purchasers thereunder, the “RPA Purchasers”; and the related obligations, the “RPA Obligations”).
  • The RPA Purchasers are among the Consenting Stakeholders supporting the Restructuring Support Agreement, representing 100% of the accounts receivable purchasers.

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Events Leading to Bankruptcy

Operating Profile Following the Initial Restructuring Transactions

• In 2022 and 2023, the Company and certain of its lenders—including members of what would become the Ad Hoc Group—completed a series of out-of-court restructuring transactions designed to create runway to execute on the Company's business plan:
  • These transactions provided new capital and extended certain then-existing funded debt maturities, most recently to 2026 and 2027.
  • Since closing, the Company has continued to operate as a going concern and has generated positive adjusted EBITDA.
• Despite this operational profitability, revenue growth and overall scale never reached a level sufficient to service the Company's funded debt obligations while simultaneously maintaining the minimum liquidity required to fund working capital, capital expenditures, lease obligations, and other ordinary-course operating expenses.

Proactive Evaluation of Capital Structure Needs

• Entering 2025, the Company undertook a forward-looking review of its projected cash flows against its debt service requirements and minimum liquidity covenants, identifying approximately $300 million of funded debt maturities coming due in 2026, alongside ongoing cash interest obligations and other fixed payment commitments. This early-2025 figure predates the additional accrued PIK and unpaid interest and the Superpriority financing reflected in the current capital structure shown above.
  • The Company concluded that, absent a material improvement in operating performance or a capital structure adjustment, it would be unable to both meet its scheduled debt service obligations and maintain sufficient minimum liquidity to operate safely and in compliance with its debt documents.
  • Critically, these challenges stemmed not from operational deficiencies but from an imbalance between the Company's capital structure and its operating revenue, prompting management to explore strategic alternatives to address its balance sheet while complementing the Company's growth potential.

Exploration of Strategic Alternatives and Advisor Engagement

• Beginning in early 2025, the Company engaged its Advisors and initiated discussions with an ad hoc group of certain first lien and third lien term loan lenders (the "Ad Hoc Group") and Tango Private Holdings II, LLC, its sole direct equity holder (the "Consenting Investor"), to align the Company's capital structure with its operating profile.
  • Management and the Advisors evaluated a full range of alternatives, including refinancing transactions, consensual equitization or liability management transactions, incremental capital raises, and a potential sale of the business.
  • In parallel, the Company assessed several significant upcoming liquidity events—the November 2025 maturity of the Revolving Credit Facility (the "Revolver Maturity"), a material fourth-quarter payment tied to certain unutilized fiber leases (the "Fiber Lease"), and a substantial December 2025 cash interest payment under the First Lien Term Loan Facility (the "December Interest Payment").
  • The Company determined that satisfying all such obligations in the ordinary course would significantly impair operating liquidity, risk credit agreement covenant breaches, and disrupt its evaluation of strategic alternatives. It further concluded that a broad Marketing and Sale Process offered the greatest opportunity to canvas the market and maximize asset value.

Forbearance Agreements and the PIK Bridge

• To preserve liquidity and establish a stable environment for negotiations, the Company secured a series of forbearance agreements from lender supermajorities under its First, Second, and Third Lien facilities:
  • On October 31, 2025, the Company entered into the Initial Forbearance Agreements, under which lenders agreed to forbear from exercising default-related remedies arising from existing or anticipated defaults—primarily relating to the Revolver Maturity and the Fiber Lease—that would otherwise trigger cross-default provisions across the Company's secured facilities.
  • The parties subsequently amended these agreements to forbear from remedies relating to the December Interest Payment, giving rise to the "PIK Bridge," which proved necessary to fund the Company's ongoing review of strategic alternatives and pursuit of the Marketing and Sale Process.
  • On January 6, 2026, following continued negotiations, the Company entered into Amended and Restated Forbearance Agreements that extended the forbearance through the maturity of the First Lien Term Loan Facility and also covered the nonpayment of the March 2026 cash interest under that facility (the "March Interest Payment"). The amounts otherwise due on the December Interest Payment and the March Interest Payment, inclusive of any default interest, together comprise the Rolled PIK Bridge (defined below). These agreements also contemplated a Restructuring Support Agreement, executed the same day (the "Initial Restructuring Support Agreement").

Governance Enhancements: The Special and Transaction Committees

• In connection with its restructuring efforts, TPx Holdings strengthened its governance framework through the appointment of independent directors and the formation of dedicated committees:
  • On September 30, 2025, the Board appointed James Gillis and Anthony Horton as Initial Independent Directors, and on October 27, 2025, established a Special Committee comprising those directors to evaluate strategic alternatives and conduct an independent investigation into potential claims against related parties (the "Independent Investigation").
  • On January 6, 2026, the Board appointed David Aloise and Lloyd Sprung as Subsequent Independent Directors and formed a Transaction Committee—comprising all four Independent Directors—to oversee the Marketing and Sale Process. The Subsequent Independent Directors were later added to the Special Committee on April 24, 2026.
  • As of February 19, 2026, the Special Committee engaged Katten Muchin Rosenman LLP as independent counsel to assist with the Independent Investigation, which remains ongoing and is anticipated to conclude during the Chapter 11 Cases.

The Marketing and Sale Process

• On December 4, 2025, the Company, with the assistance of its investment banker, PJT Partners LP ("PJT"), formally launched a marketing and sale process for all or a portion of its assets (the "Marketing and Sale Process"), which drew significant interest from both strategic and institutional buyers:
  • PJT contacted 65 potential buyers, of which 33 executed non-disclosure agreements and accessed the data room. The management team and PJT conducted 26 diligence sessions, including 9 management presentations.
  • Following multiple rounds of engagement, the Company received 9 bids; however, none reflected terms sufficiently developed to proceed on an actionable basis at that time.
  • In consultation with its Advisors and key stakeholders, the Company determined that continuing the process in a court-supervised environment would maximize value and afford additional time and flexibility to solicit higher or better bids. The process will therefore continue postpetition under bidding procedures incorporating minimum bid requirements (the "Minimum Bid Requirements").

Superpriority Term Loan Facility and Further Forbearance Amendments

• Beginning in early 2026, the Company negotiated a $20 million bridge financing with the Ad Hoc Group and the Consenting Investor under the Superpriority Credit Agreement, which was consummated on March 18, 2026:
  • This Superpriority Term Loan Facility provided incremental liquidity and runway to continue the Marketing and Sale Process and to negotiate the Restructuring Transactions.
  • As part of the same effort, the parties further amended the Forbearance Agreements to cover additional events of default relating to the maturity of the First Lien Term Loan Facility.
  • Together, the Forbearance Agreements and the Superpriority Term Loan Facility alleviated near-term liquidity constraints, deferred imminent maturity pressures, and supported constructive negotiations toward both a potential Sale Transaction and, if necessary, a Reorganization Transaction.

The Restructuring Support Agreement and Dual-Track Strategy

• More than a year of stakeholder engagement culminated in a Restructuring Support Agreement—most recently amended on June 28, 2026—memorializing broad creditor support for a dual-track restructuring:
  • The Restructuring Support Agreement is supported by the Consenting Investor; 100% of the Company's superpriority term loan lenders; approximately 98% of its first lien lenders; 100% of its second lien lenders; approximately 88% of its third lien lenders; and 100% of its accounts receivable purchasers (collectively, the "Consenting Stakeholders").
  • Under the agreement, the Consenting Stakeholders agreed to vote to accept the Plan, provide releases, refrain from impeding the Restructuring Transactions, and support entry into the DIP Facility.
• The dual-track structure subjects the Company's assets to a robust, market-tested process while preserving a committed fallback:
  • If the Marketing and Sale Process yields one or more actionable bids satisfying the Minimum Bid Requirements, the Debtors will pursue a value-maximizing sale to the highest or best bidder under section 363 of the Bankruptcy Code (the "Sale Transaction").
  • If no such bid emerges, the Debtors will instead pursue a recapitalization with certain existing lenders and the Consenting Investor through a chapter 11 plan of reorganization (the "Reorganization Transaction").

DIP Financing and Path Forward

• The Company enters Chapter 11 with commitments from participating First Lien lenders—including the Consenting Investor—to provide a $73.5 million senior-secured, priming debtor-in-possession facility (the "DIP Facility"):
  • The facility consists of $20 million in new-money loans (the "New Money DIP Facility") and a $53.5 million Roll-Up Facility, comprising $34.7 million of rolled Superpriority loans after the 1.75x MOIC (the "Rolled Bridge Facility"), $13.8 million of unpaid First Lien cash interest (the "Rolled PIK Bridge"), and $5 million of rolled First Lien loans (the "Pari Rolled Debt").
  • Participation in the DIP Facility was offered to all First Lien Term Loan and Revolving Credit Facility lenders on the same terms and was backstopped by certain members of the Ad Hoc Group.
• Should the Reorganization Transaction be consummated, the Debtors' capital structure would be reorganized substantially as follows (each as set forth in greater detail in the Plan):
  • New Money DIP Facility obligations convert dollar-for-dollar into a new first lien exit facility (the "1L Exit Facility").
  • Rolled Bridge Facility obligations either convert dollar-for-dollar into the 1L Exit Facility (if the holders fund their pro rata portion of the New Money DIP Facility) or are paid in full in cash from the Preferred Equity New Money Commitments.
  • Rolled PIK Bridge obligations convert either dollar-for-dollar into the 1L Exit Facility or into Tranche A Preferred Equity Interests, as applicable.
  • Pari Rolled Debt obligations convert dollar-for-dollar into the 1L Exit Facility.
  • Remaining First Lien Term Loan Facility and Revolving Credit Facility obligations either convert into equity of the reorganized Company (subject to dilution per the Plan) or receive a pro rata cash payment from the Preferred Equity New Money Commitments.
  • Second Lien Term Loan Facility obligations convert into warrants exercisable for equity of the reorganized Company, subject to the exercise limitations in the Plan.
  • Certain Consenting Stakeholders provide the Preferred Equity New Money Commitments, comprising a $51.6 million new-money commitment, a $3.7 million commitment fee, and $9.3 million of Rolled PIK Bridge obligations (together, "Tranche A"), plus a $9.8 million contribution of RPA Obligations back to the Company by the RPA Purchasers ("Tranche B").
• The result would substantially de-lever the Company's balance sheet by approximately $1 billion—from roughly $1.1 billion of funded debt outstanding to approximately $129 million, consisting of an approximately $54 million Exit 1L Term Loan, approximately $65 million of Tranche A Preferred Equity Interests, and approximately $10 million of Tranche B Preferred Equity Interests.
• Whether through the Sale Transaction or the Reorganization Transaction, the Company believes its dual-track approach represents the best available path to preserve going-concern value, maximize creditor recoveries, and emerge with a deleveraged balance sheet, all while ensuring reliable and uninterrupted service to its customers.