According to the first day declaration of president and CEO Todd Hinders, the company believes a sale will “unlock the fullest potential” of Edgio’s core businesses. The case will be overseen by Judge Karen Owens of the US Bankruptcy Court for the District of Delaware, and a first day hearing is to be determined.

Debtwire Dockets: Edgio Inc.

The company

Edgio in its current form was formed in 2022 via the stock-for-stock combination of two internet content delivery companies named Limelight Networks and Edgecast, the former a publicly-traded entity, Hinders says in his declaration. At the time, he continues, investors on both sides expected a synergistic combination of the two content networks, leading to increased market reach and profits. Limelight held a collection of website management and networking services tailored to large files such as on-demand video or software, while Edgecast offered security solutions, video management, and a network better suited to smaller files such as images and website metadata. Limelight was formed in 2001 in Phoenix, then later incorporated in Delaware in 2003.

Edgio, in whole, aimed to let clients develop and deliver their digital services. It serves two main types of companies: those with media at their core such as entertainment and sporting companies, and companies with “high digital interaction” with customers like retailers or financial services entities, Hinders says. Its products fall into three categories: content delivery networks, a streaming platform, and a collection of apps. The debtors run over 300 servers in various locations and Hinders writes that it owns most of its equipment but leases space at various datacenters.

The debt

Edgio enters Chapter 11 with just under USD 250m in funded debt, largely arising from a secured note with over USD 140m outstanding. Both those notes and its second largest instrument, a priority credit agreement, have Lynrock Lake as the lender. The company has no unsecured funded debt, but several other unsecured obligations such as trade debts.

The descent

Hinders’ account of the debtors’ difficulties starts with the Limelight-Edgecast transaction. The deal never produced the results desired, with Edgio being “beset throughout 2023 and 2024 by difficulties and challenges,” Hinders says in his declaration. Chief among those is a series of compliance challenges starting early last year. In March 2023, management and an audit committee determined that the company’s financial statements for 2020 and 2021 should be restated and declared unreliable due to accounting errors. Along with the downward adjustment to the company’s metrics for certain key sales that resulted and the time it took to implement corrections, Edgio filed its 10-K and quarterly reports late. In April 2023, the company was delisted from the Nasdaq exchange after it closed below the minimum requirement.

Searching for a way to avert delisting, the company consulted with counsel on options such as a transfer to Nasdaq Capital market. Hinders says that the company’s advisors failed to tell it that that transfer would trigger changes to its unsecured notes indenture at the time, and Edgio authorized the transaction. While that resulted in the company’s relisting on Capital Markets, Hinders says it led to “dramatic repercussions,” triggering a “fundamental change” event under the notes indenture, giving Edgio’s noteholders the right to require the repurchase of those notes at par plus interest, or convert the notes into common stock. The company lacked the cash to repay the unsecured notes at par, which resulted in a renegotiation that effectively replaced that instrument with the secured notes now part of its capital structure.

Then, Hinders continues, at the end of fiscal year 2023, Edgio’s accounting firm resigned. While the company engaged a new one, the search delay caused it to file its annual reports on time, which triggered defaults under both the credit agreement and the new secured notes. It then attempted to reorganize or sell outside of bankruptcy, but ultimately lacked the runway to reach a solution without Chapter 11 protection.

The bankruptcy sale

Edgio plans to sell its assets in bankruptcy, with Lynrock providing both debtor-in-possession (DIP) financing and a stalking horse bid. Hinders’ declaration states that the stalking horse offer consists of a USD 110m credit bid. The DIP consists of USD 15.6m total in new money, plus a substantial rollup of prepetition debt. The company will seek a part of the rollup on day one.

The advisors