The infrastructure sector has lost an independent player to chapter 11 bankruptcy, demonstrating that while the fiber business as a whole is pretty healthy right now it is still not an easy one. Late last week, Allied Fiber’s southeastern subsidiaries declared bankruptcy in Delaware court after finding it more difficult than hoped to sell dark fiber and on its newly constructed Atlanta-Miami route.
After trying to get a route between New York, Chicago, and Washington DC running for several years, a few years back the company switched gears to put in conduit and fiber on its southeastern route. They built out 708 route miles of fiber with colo huts of about 1200 square feet every 60 miles along the way. They finished last spring, but the revenues just didn’t get there soon enough.
The company had been looking at strategic alternatives for some 18 months, but didn’t find what it was looking for as the finances started to crumble. According to the filing, with its buildout complete the Southeast section of the company’s business finished February 2016 with $8.5M in annualized operating costs but still just $0.5M in annual recurring revenues. In March they cut those costs by firing all employees, hiring back a core group to keep things running while still seeking alternatives. They didn’t find any, and thus filed for chapter 11.
Allied Fiber’s business model was a unique one, and I had thought it would have better legs than it did. But in the end, what Allied did not have was a large anchor customer. Instead, they looked to line up smaller providers hungry for dark fiber to make up for it with numbers. Some did, with regional operators like Southern Light, Planters Communications, C&W Communications, and others signing on for infrastructure. But if enough customers were out there, they didn’t move quickly enough to make a difference.
So now what happens? Does Allied Fiber’s southeastern infrastructure emerge from the ashes intact with new owners and a new plan? Or does a suitor swoop in and pick up the assets for itself? Given the wariness the private equity guys had for the assets all along, a strategic buyer seems the more likely route to me. (And the filing indicates that a court-supervised sale is the intent.)
It isn’t hard to think of a suitor. Zayo, for instance, doesn’t have longhaul dark fiber on this route and isn’t the least bit afraid of the dark fiber business. They’ve always viewed Allied Fiber’s business model rather skeptically, but the assets themselves would have to seem pretty attractive once unencumbered by the debt and all that. Another possibility would be one of those regional providers who found the route of use already and specialize in infrastructure in the region. Southern Light springs to mind in that regard. Another regional player with the resources to do it would be FPL Fibernet.
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Categories: Fiber Networks · Financials
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I wonder how much capital was invested to get that stellar $40k of monthly revenue?
Did you ever try to work with these guys to get back info and a quote? impossible. guess they had more important stuff to do
The arrogance displayed by various members of the management team at industry events was at times unbearable. I am not surprised that the customer came last.
This saddens me. I wish them the very best.
This is probably a good pick up for a company like CS&L. Dark Fiber & Conduit fits nicely into a REIT model.
Interesting thought…
I am not sure this is salvageable. The network is limited to 2 – 3 customers in any metro area (carriers who can build the lateral to the backbone). The colo facilities are not located in major metro areas. The ROW fees to RRs are extremely high and probably escalate every year. The access points are not where the RR meets the public ROW meaning you have to build several miles to splice in. The route in FL is one of the most common in the industry. Overall a disaster of epic proportions for the shareholders and an embarrassment to the management team.
Allied Fiber LLC Has not Filed Chapter 11
http://blog.tmcnet.com/blog/rich-tehrani/networking/allied-fiber-llc-has-not-filed-chapter-11.html
I have covered the Allied Fiber efforts for years independently. Tehrani’s article here:
http://blog.tmcnet.com/blog/rich-tehrani/networking/allied-fiber-llc-has-not-filed-chapter-11.html
is correct. This looks like a hostile takeover attempt to essentially grab the working SE assets of Allied by forcing a fire sale of the network to an outfit like Level3, or none of the big incumbent Bells, et al.
The shortsightedness of this is appalling on many levels. If the entire Allied Fiber route around the USA were to be built as planned, the benefit to the nation as a whole from having an open dark fiber infrastructure NOT controlled by a single entity – but open to any and all – would be virtually priceless.
The critical communications infrastructure in this country is in the hands of a tiny few who want to keep it that way. The Allied Fiber route would open pathways to undersea cables on direct links that could benefit the hundreds of regions that want to build out very high speed broadband around the established carrier and cable companies, but that are blocked by the interests of incumbent carriers and entrenched, publicly traded companies that are not customer focused.
Bear in mind AT&T sues tiny towns in Kansas for trying to build muni broadband that is faster than 750kb/sec dsl.
I have spent more than 25 years covering this issue and what this is beginning to look like to me is a repeat of what I have witnessed for decades: a move to block something that is a threat to the way things are done by forcing the breakup of the plan in order to extract short term gain – as opposed to building out with foresight and patience a system that would be worth billions when completed.
It’s rich reading the “anonymous” posts in here. I’m using my real name and stand by my research, which is voluminous. Of course, when you break a priceless Ming vase into a few thousand pieces and you hold up random bits of it and say, “I am not sure this is salvageable,” as I see in a post above, that’s the classic way to devalue something. Broken into sub parts, one can easily point to Allied Fiber and say, “see, this little colo hut in central Florida is worth nothing.”
However, you expand access via this plan around the entire United States and you have something that is a massive threat to the status quo.
Since Allied Fiber itself has not filed an 11, I expect to see a real fight emerge to get this thing backed by people who can see past the front of their own noses. There is a lot of capital sitting idle right now and this is the fiber equivalent of the transcontinental railroad.
Stopping it would be like having the Pony Express succeed in preventing the construction of the telegraph.
Disclaimer – I have never received a cent of compensation from Allied Fiber, or any other network company. I am an independent financial investigative research journalist focused on the technology and communications sectors.
John F. Harrington
CEO/Founder
Verify Research Associates
John, this is a pie-in-the-sky idea at best if anyone could afford to build it out. Allied Fiber LLC burned through $20M on options from 2007 to 2012 – without putting any fiber in the ground – or signing a paying client. Does that sound like there was demand?
The route from MIA-JAX to ATL is pretty competitive. No idea why you think clients are held hostage. Customers are held hostage when there is just 1 provider, like for broadband or a rural fiber route. This route has competition.
You make it sound like the ILECs came in and shut it down. The 2 investors dumped $93M into this scheme over the course of almost 10 years to get $500K in annualized revenue out, for which there are $8.5M in opex. How do you see that turning around?
Regards,
Peter (I always sign my name)
Just got a quote for a 100gig on this route and I can assure you it is competitive 🙂
I didn’t know Allied was also into lit services now?
It wouldn’t be Allied offering lit, if it’s on the Allied route it would one of their customers as they had/have no add/drop gear to provide lit. That may change with new owners, but it’s not happening now.
That BK filing document was a great read. $93M invested, of which $20M was burned in railroad options from 2007
to 2012 while they tried to sell their plan. Then the pivot. The actual build and then $50k in revenue on colos every 60 miles?
@rtehrani writes that it was the investors who forced the BK – http://blog.tmcnet.com/blog/rich-tehrani/networking/allied-fiber-llc-has-not-filed-chapter-11.html
Possible buyers? CS&L or Zayo or actually Southern who is a customer. I don’t see FPL buying it; they have been dormant.
That the lenders forced the issue makes a lot of sense after rereading the document. So the parent company Allied Fiber isn’t itself in BK court, but rather the subsidiary with all the assets was put there by the lenders who had had enough. Not fun for anyone though, and it doesn’t matter much who made the decision or which corporate entities did what – the assets and operating units are there either way and most of the people working them are no longer doing so.
Wow. This was unexpected.
I wonder what differs between Allied Fiber and people like Neutral Path that seem to be getting along well doing nothing but dark.
Sales.
NP was founded in 2011, not 2007. The management team has done a number of exits. Well-connected in the cellco and data center sectors.
Mike Miller got what he deserved and anybody knows you have to have a unique route so you can charge a premium to begin with… Turning up a competitive route as your initial offering is folly…
Make no mistake this is Hunter Newby’s baby.
Mike Miller was brought in to fix Hunter’s disaster.
Whatever you say Mike lol…
Actually Mike H was correct. This was Hunter’s baby. I had to listen to him pitch it about 7 times. When you pitch your plan for 5 or 6 years and don’t get any takers, shouldn’t that have been a sign?
Unfortunately, it was Mike Millers plan to turn up the segment and hope they could get enough revenue to sustain it.
They missed out on the fiber low latency opportunity between New York and Chicago. I would like to see the whole network come to fruition, but one of the other commenters was right in that you don’t have a lot of steam until you have a broad portfolio. They simply didn’t have enough glass in the ground for someone to look at them from Nationwide View.
Pete way to deflect for Mike Miller, but his last initial is M not H..lol
Mine is H, though.
I feel for you having to sit through Hunter 7 times about anything.
Oh Mike M. quit blaming Hunter for your poorly executed plan…
AF is done. Sold. “Allied Fiber” Parent is now a shell company:
http://www.law360.com/articles/817803/dark-fiber-firm-sells-network-for-24m-in-ch-11-sale
Strome is done too!!
Why is everyone worried about all this
Hunter the TELX crook lost and the hens have come home to roost. main question: Where did the $93M go? Hunter looted the company of its gold and left the crumbs for everyone else.
Bernie Madoff will have a cell-mate very soon.
What is amazing about the amount of funds Hunter squandered, is where it went. Over the last few years while Allied Fiber was getting off the ground, Hunter clearly spent a huge portion of his time and millions of dollars in Allied Fiber resources to build his Netrality business. Hunter even had the Allied Fiber sales team working on his carrier hotel alliance gig. How Strome and the other Allied Fiber investors let Hunter build Netrality on their dime is crazy, maybe the investors deserve a piece of the new company they paid to build before Hunter steers that ship into the rocks too.
This is Unreal How much money did Hunter Pocket