Zenith Infotech Appeals Liquidation Order

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  

Embattled cloud and backup vendor Zenith Infotech appealed to India’s highest court, hoping to stave off creditors’ efforts to liquidate the company to recover unpaid debts. The court has an idea for how to end the debt crisis quickly.

On the second anniversary of its bond default, embattled Zenith Infotech is making a last ditch effort before the India Supreme Court to stave off liquidation and pay its massive $85 million debt, according to foreign press reports.

Last month, a lower court ordered the liquidation of the cloud and backup vendor. The court agreed with creditors that Zenith Infotech no longer had the cash flow or assets to fully pay off its debts. Liquidation, they argued, would recover a portion of the tab.

Related articles

Working in favor of creditors' arguments is Zenith Infotech’s admission earlier this year that its assets and cash flow were less than its outstanding debt.

Since defaulting on its foreign currency convertible bonds in September 2011, Zenith Infotech has maintained its intent to repay the $85 million debt, preferably in installments. The company proposed to the court that it would pay $4 million to creditors now and the balance over the next two to three years.

In a sign liquidation could be averted, the court suggested Zenith Infotech pay $8 million now and $8 million a month until the debt is paid off. Under this plan, the debt would be settled in 10 or 11 months.

Zenith Infotech is considering the court’s proposal and will reply with a decision today.

Creditors, mostly U.S. banks and investment firms, haven’t weighed in on court deliberations.

The willingness of the India high court to cut Zenith Infotech a deal does not come without conditions. The court already told the company’s lawyers that Zenith Infotech will have to demonstrate an ability to repay its debts before the court will approve a non-liquidation plan.

The India courts and regulatory agencies have been critical of how Zenith Infotech handled its debt situation. The company bond default happened a week after the sale of its remote monitoring and management (RMM) division to Summit Partners for $55 million.

Summit Partners took the RMM assets to form a new company, Continuum, which has transformed itself into a thriving managed services provider. While operationally separate, Zenith Infotech maintains a minority share of Continuum. Continuum is not attached to the debt litigation or potential consequences.

The lower court found Zenith Infotech diverted the proceeds from that sale to a subsidiary with little fiduciary interest in the company. Additional funds were siphoned to support a sister company, Vu Technologies. In the final analysis, the lower courts charged Zenith Infotech with trying to skirt its debt obligations.

Since the bond default, Zenith Infotech has lost considerable business in its U.S. operations. Partners have defected to competing brands and support staff has shrunk. Nevertheless, Zenith Infotech hasn’t given up; it continues to market at events, launch products and ply partners with new offers.

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  
More on Backup/Business Continuity/Disaster Recovery
A man staring into a stack of racks in frustration

Veeam blasts Facebook for 'painful' outage

Disaster-recovery firm unimpressed with outage that could cost businesses 'millions'

cog-in-cloud

Asigra announces cloud solution for Docker Containers

Solution aimed at SMBs and multi-nationals

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
ken-shaw-infrascale

Vendor Q&A Series: Ken Shaw Jr., Infrascale

The latest channel exec to sit in the Channelnomics hotseat is Infrascale's CEO

businessman-walking-rope-outdoor-balance

MSP market saturation may lead to smaller players being dumped by vendors

Smaller players need to ensure that they don't fall prey to solution provider consolidation by vendors

Questions

Windows 10 service model raises enterprise, channel questions

Microsoft is banking on the fact that its next OS will be an improvement over prior iterations, but will the product’s sales model be as well received as the product itself?

Handshake in London

Microsoft Big Data acquisition shows willingness to embrace open platforms

The software giant embraces yet another open-source tool in R and stakes its claim in the analytics arena