GTT in crisis as NYSE delists shares for failing to report results

GTT in crisis as NYSE delists shares for failing to report results

GTT Europe network.jpg

The New York Stock Exchange is delisting GTT Communications’ shares as, at the same time, doubts are cast on the company’s plan to sell its infrastructure division for more than US$2 billion.

GTT stock is now sold on the over-the-counter (OTC) market only, and the share price has plunged to only 76 cents at last night’s close. As recently as 25 June, four weeks ago today, the shares traded at $3.09, when GTT was still on the NYSE.

The current valuation means that GTT’s market capitalisation is now only $44.4 million.

The NYSE told the US financial regulator, the Securities and Exchange Commission (SEC), that it intended to delist GTT’s shares from 2 August, but the shares have already moved from the main list to the OTC – a steep fall for a company whose shares peaked at $60.25 just three years ago.

The main reason for the delisting, said the NYSE, was that it has failed to file its quarterly and annual results. “The company is no longer suitable for listing because the company is delayed in filing with the Securities and Exchange Commission its quarterly reports on Form 10-Q for the quarters ended June 30, 2020, September 30, 2020 and March 31, 2021 and annual report on Form 10-K for the fiscal year ended December 31, 2020.”

In August 2020 GTT said it had “identified certain issues related to the recording and reporting of cost of telecommunications services and related internal controls” – a rather surprising admission for a company that has specialised in providing telecoms services since 1998.

Mike Sicoli, CFO from April 2015, left the company in September 2019. Dan Fraser, who joined in April 2014 as senior VP, principal accounting officer and global corporate controller, spent a short time as interim CFO and left entirely in September 2020. New CFO Steven Berns stepped down from the role in December 2020, though he had been with the company only nine months. Rick Calder, CEO from May 2007, left the company in June 2020. Donna Granato became interim CFO in December 2020

Capacity contacted Randy Slack, VP for strategic marketing and communications, by email yesterday for a comment about the NYSE’s delisting decision. Slack has not yet replied.

Capacity also asked him, and is waiting for a reply to, a question about the future of the infrastructure division. In October last year, I Squared Capital (ISQ), the US private equity company that already owns Hong Kong’s HGC Global Communications, said it had agreed to buy the infrastructure division of GTT for $2.15 billion.

So convinced was ISQ of the deal that it broke with tradition and offered partner Mohamed El Gazzar for an interview with Capacity within hours of the announcement. An enthusiastic El Gazzar told Capacity that it had bid unsuccessfully for Interoute in February 2018 but was beaten on price by GTT – when GTT agreed to pay $2.3 billion.

“We know [the former Interoute] well. We started in 2017 and it is unfinished business.”

El Gazzar also said in that interview that, once the deal was complete, ISQ would be looking for further purchases to add to the network of fibre and data centres. “There are a lot of bolt-ons you could do – tier 2 and tier 3 cities and data centres,” he said then.

But nine months later ISQ has withdrawn back to its customary silence. One of the challenges is that ISQ requires audited results, which GTT has failed to provide since May 2020, when it provided its first quarter 2020 numbers.

ISQ also requires regulatory approval. According to one source who has seen some of the paperwork from GTT, the former Hibernia Express transatlantic cable includes equipment from Huawei. The US government requires it to be removed before granting approval, Capacity understands.

If that’s not bad enough, GTT is highly indebted after the previous management’s buying spree. GTT completed purchase of Hibernia Networks in January 2017 for $590 million, and of Interoute at the end of May 2018 for $2.3 billion. After that deal the company claimed annualised revenue of $2 billion, including other acquisitions, such as MegaPath and Global Capacity.

Though the absence of recent results makes it hard to be sure, reports suggest the company had a net debt of $3.19 billion in October 2020.

One person close to the industry told Capacity last night that, despite the problems, GTT “is still going to the industry” with proposals for telecoms solutions. “The shining asset is GTT Express, the former Hibernia Express,” said this person.

Another person told us: “I deeply hope some deal is done as those assets are great assets and the customers are also first rate.”

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