Zenith Infotech Defaults, Zenith RMM Spin Off Questioned

Managed services platform provider Zenith Infotech, just a few weeks after announcing the sale of Zenith RMM to Summit Partners, has acknowledged that it has defaulted on $33 million in bonds. But the firm claims that it remains financially solvent.

Zenith Infotech has defaulted on $33 million in foreign currency convertible bonds, and the default has apparently triggered remaining bonds to come due for a total of $85 million, according to the Times of India.

One of the bondholders, New York-based QVT Financial, told the Times that the default means the other bonds are accelerated for immediate payment.

Zenith Infotech confirmed the default and issued a statement to partners and customers stating that the company is financially sound and that it is working to renegotiate the bonds. The company did not explain the strategy behind defaulting on its bonds if it is financially sound. Zenith Infotech then shut down any other statements.

Meanwhile, Zenith RMM, spun off by Zenith Infotech in a sale to Summit Partners in a deal announced on Sept. 28, distanced itself from Zenith Infotech, sending a note to partners that backup and disaster recovery, advanced recovery and continuity appliance, Smartstyle and MirrorCloud products were still part of Zenith Infotech, not Zenith RMM, and that any issues with these products should be communicated to a Zenith Infotech Account Manager.

Summit Partners investment in Zenith RMM remains undisclosed. And while Zenith Infotech retains a "major" stake in Zenith RMM, and Zenith Infotech's CEO sits on Zenith RMM's Board, the stake is also undisclosed.

The Times reports that Zenith Infotech said it had received all the money due from the Zenith RMM sale except for the amount to be held in escrow, part of which the company plans to use for partial repayment of FCCBs.

QVT and a few other shareholders have reportedly filed suit against Zenith Infotech seeking to stop the sale of assets and seeking to learn the details of the Zenith RMM deal structure and the value of the transaction.