The document – filed by former EVP and CFO Scott Drake in the US Bankruptcy Court in Delaware – revealed that the company had defaulted on its debt and did not indicate signs of producing profits.
According to Drake, Allied Fiber’s Southeast segment, consisting of operating subsidiaries AF Florida and AF Georgia, had failed to generate expected revenues from its colocation facilities and dark fibre networks. In 2015, the market generated $500,000 in annual recurring revenues on annual operating costs of $8.5 million.
The bankruptcy filing of the subsidiaries is also said to be a result of a disagreement between Allied Fiber LLC and its senior secured lender Strome Mezzanine Finance.
Drake added: “At the end of February 2016, despite heavy marketing and extensive efforts to obtain funding (including by Allied Fiber’s board of managers and a third party financial advisor, Source Capital), no party was willing to continue to fund capital expenses and operating losses for a business model that seemed dubious to succeed.
“As such, Allied Fiber fired all of its employees and in essence, left the patient open on the operating table. In order to preserve their value as a going concern, the debtors – where all operations were centered – secured emergency interim financing from the senior pre-petition lender.”
Allied Fiber has struggled to sell dark fibre on its new Atlanta-to-Miami route following an earlier failed attempt to build a Northeast network linking New York, Chicago and Washington, D.C. The company invested approximately $20.5 million on the Northeast route in 2012, according to the filing. The next hearing on the case is scheduled for May 13, 2016.
