U.S. TelePacific Corp. and eleven affiliated debtors filed an amended disclosure statement and an amended joint chapter 11 plan on August 18, 2026 in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The amendment follows a notice filed eight days earlier stating that no qualified bid arrived by the bid deadline, that the auction scheduled for August 12 was cancelled, that the debtors will not proceed with a sale transaction, and that they are instead proceeding with a reorganization transaction under the plan.

The disclosure statement characterizes the debtors' challenges as not a consequence of operational deficiencies but rather an imbalance in the capital structure given operating revenue.

The disclosure statement describes a national provider of managed connectivity and networking, unified communications, cybersecurity and information technology services to business customers across the United States. The company was founded in 1998 in California as TelePacific Communications, operating primarily as a competitive local exchange carrier serving small and mid-sized business customers in that state.

Three acquisitions built the current footprint. NextWeb in 2010 added broadband and enterprise connectivity in Nevada as well as California. Tel West Communications in 2011 established a Texas presence and added thousands of small and mid-sized business customers. DSCI in 2016, a managed services provider headquartered in Massachusetts, expanded the customer base into the northeastern United States and added unified communications and managed information technology capabilities. Historical concentrations remain in California, Texas and the Northeast.

The company serves approximately 11,000 customers primarily operating across the fifty states, in healthcare, financial services, legal, retail, manufacturing, education, government and non-profit organizations. It is headquartered in Austin, Texas, supported by approximately 575 employees working on premises or remotely, hundreds of independent contractors, and approximately fifty employees of a non-debtor affiliate in Ireland providing back-office customer and information technology support.

The four service lines are managed connectivity and networking, which the disclosure statement describes as the largest and most business-critical portfolio and which includes software-defined wide area networking, dedicated internet access, Ethernet transport and private networking; cybersecurity solutions including secure access service edge, managed firewall and network security, endpoint protection and incident detection and response; unified communications including hosted voice over internet protocol telephony, video conferencing, team collaboration and cloud-based contact center services; and managed infrastructure and information technology services including server and endpoint management, cloud migration, backup and disaster recovery and remote help desk. The disclosure statement states the company functions as an outsourced information technology department for many small and mid-sized enterprises, on a subscription model generating recurring revenue across multiple service lines.

The debtors operate as regulated carriers holding numerous federal and state telecommunications licenses and authorizations. Federal Communications Commission approval is required for any transaction resulting in a direct or indirect transfer of control of regulated entities. The disclosure statement states the restructuring transactions cannot be consummated until, among other things, all required Commission approvals have been obtained, and that as a practical matter the Commission is not expected to grant applications until all time periods required by its rules have passed. State public utility commission applications will be filed where transfer-of-control approval is required, with the level of review and timing varying by state, and the debtors and their advisors are continuing to assess whether further clearances beyond the Commission and the state commissions apply.

In February 2022 the company announced a $70 million growth equity investment led by Siris Capital Group, LLC, and refinanced its senior debt obligations on terms the disclosure statement describes as more favorable, including a multi-year extension of maturities. The disclosure statement states that although the transaction provided incremental capital and extended runway, the business remained subject to significant funded debt obligations.

The 2023 transaction produced the current structure. Before it, funded debt consisted primarily of a first lien credit agreement providing a term loan facility with an initial aggregate principal amount of approximately $580 million and a revolving credit facility with an initial aggregate principal amount of approximately $25 million.

That facility was refinanced through an offering to participating lenders to up-tier 50% of their current first lien holdings into a new super-senior first lien facility. The remaining 50% of existing first lien holdings were purchased by the consenting investor at a discount and subordinated to the participating lenders, which produced the second lien term loan facility. The second lien facility also carried an approximately $65 million new capital infusion from the consenting investor. Participating lenders received additional consideration through a third lien term loan facility in amounts equal to approximately 5.0% of their holdings under the prior facility. One lender did not participate, and its holdings remain outstanding as a stub position under the revolving credit facility.

The consenting investor is defined in the disclosure statement as Tango Private Investments, LLC, Tango Private Holdings I, LLC and Tango Private Holdings II, LLC, the company's sole direct equity holders. A footnote states the consenting investor or an affiliate also holds a minority position in the first lien and third lien facilities and holds 100% of the obligations outstanding under the second lien facility.

Wilmington Savings Fund Society, FSB serves as administrative agent and collateral agent under all five funded debt facilities, with U.S. TelePacific Corp. as borrower and U.S. TelePacific Holdings Corp. as parent guarantor. Amounts outstanding include principal plus accrued payment-in-kind and unpaid cash interest.

Two of those maturity dates had passed when the company filed. The revolver matured in November 2025 and remains outstanding, and the first lien matured in May 2026 and is subject to forbearance agreements. A third, the superpriority facility, matured in July 2026. A footnote states the superpriority facility carries a 1.75 times multiple on invested capital that is not included in the $22 million balance shown.

All five facilities are secured by liens on substantially all assets. The first lien and revolving facilities are subject to a pari passu intercreditor agreement dated June 1, 2023, under which distributions to Class 3 are to be made. The disclosure statement states that the revolving lenders, though not party to the initial forbearance agreements, are prohibited under that agreement from exercising remedies absent consent of the required lenders.

The company has also funded ordinary course operations through the sale of accounts receivable under agreements dated February 11, 2020 with Tango Stockholder Holdings, LLC and June 1, 2023 with Tango Private Investments, LLC, the latter being one of the three entities that make up the defined consenting investor.

The disclosure statement states the company has continued to operate as a going concern and generated positive adjusted earnings before interest, taxes, depreciation and amortization, but that revenue growth and overall scale have not increased to a level sufficient to service the funded debt while maintaining minimum liquidity for working capital, capital expenditures, lease obligations and other ordinary-course expenses.

Entering 2025, the company reviewed projected cash flows against debt service requirements and minimum liquidity covenants and recognized approximately $300 million of funded debt maturities coming due in 2026. Three obligations are identified as the near-term pressure points: the November 2025 maturity of the revolving credit facility, a material fourth-quarter payment obligation on certain fiber leases no longer used by the company, and a substantial December 2025 cash interest payment under the first lien term loan facility.

The special committee was established in October 2025 and the independent investigation it directs has been ongoing since February 2026. It remained ongoing at the petition date, and the committee anticipates concluding it during the chapter 11 cases.

The process ran in two phases. Prepetition, beginning December 4, 2025, PJT Partners LP contacted 65 potential buyers comprising strategic partners and financial sponsors. Thirty-three signed non-disclosure agreements and received access to a virtual data room. Management and PJT held 26 diligence sessions and other transaction-related conversations, including 9 management presentations. The company received 9 bids, none of which reflected sufficiently developed terms to proceed on an actionable basis at that time.

The company determined that continuing in a court-supervised environment would maximize value and provide additional time and flexibility to solicit higher or otherwise better bids. The disclosure statement sets out the alternative outcome, stating the postpetition process would either consummate a value-maximizing sale transaction or, if no actionable bids were received, serve as a robust market test to inform the terms of any potential pivot to a reorganization transaction.

The court entered the bid procedures order on June 29, 2026. The order established the framework, requirements and deadlines governing the postpetition process, including minimum bid requirements that any actionable bid had to meet or exceed. No stalking horse bidder was designated.

Twenty-seven parties are reported as declining to participate further. The bid deadline was August 7, 2026 at 4:00 p.m. prevailing Central Time. The disclosure statement states that the debtors did not receive any qualified bid or other actionable bid satisfying the minimum bid requirements, and accordingly no auction would be held.

Neither the disclosure statement nor the cancellation notice states the threshold value of the minimum bid requirements, and no bid amounts, valuations or bidder identities are disclosed in the pages reviewed for this report.

The notice of cancellation was filed on August 10, 2026. It recites the bid procedures history and the conditional approval of the original disclosure statement on July 7, 2026. It states the debtors did not receive any qualified bids by the bid deadline. It states that consistent with Article XI of the bid procedures, the debtors, in consultation with the consultation parties, cancelled the auction previously scheduled for August 12, 2026 and will not be proceeding with the sale transaction. And it states the debtors are proceeding with the reorganization transaction under the plan, with the combined hearing to be held September 2, 2026 at 11:00 a.m. prevailing Central Time and objections due on or before August 26, 2026.

The amended plan and disclosure statement followed eight days later. The disclosure statement states the debtors made the determination to pursue the reorganization transaction with the consent of the ad hoc group, characterizes it as the best available value-maximizing transaction providing a clear and executable path to deleveraging while preserving going-concern value and minimizing interruption to ongoing business activities, and states the marketing and sale process served as a robust market check.

The plan filed on the petition date contemplated both outcomes, the bid procedures set out the fork, and the original disclosure statement was conditionally approved on July 7 covering both paths. This report did not review the July 6 versions of the plan and disclosure statement and does not state what else changed between them and the August 18 amendments.

The debtor-in-possession facility comprises $20 million of new money and a $53.5 million roll-up facility. The roll-up is composed of $34.7 million of loans payable under the superpriority term loan facility after accounting for the 1.75 times multiple on invested capital, $13.8 million of unpaid cash interest under the first lien facility, and $5 million of loans outstanding under the first lien facility.

Each piece then converts. New money facility obligations convert dollar-for-dollar into the first lien exit facility. Rolled bridge facility obligations either convert dollar-for-dollar into the exit facility, if the holders fund their pro rata portion of the new money facility, or are paid in full in cash from the proceeds of the preferred equity new money commitments. The rolled payment-in-kind bridge converts either into the exit facility or into Tranche A preferred equity interests. The pari rolled debt converts into the exit facility.

Remaining first lien term loan and revolving credit facility obligations either convert into equity of the reorganized company, subject to dilution, or receive a pro rata cash payment from the preferred equity proceeds. Second lien obligations convert into warrants. The third lien receives nothing.

The preferred equity new money commitments come from certain consenting stakeholders. Tranche A comprises a $51.6 million new money commitment, a $3.7 million commitment fee and $9.3 million of obligations from the rolled payment-in-kind bridge. Tranche B is a contribution by the receivables purchasers of $9.8 million of receivables obligations back to the company.

Class 3 holders would receive a pro rata share of the reorganization consideration, with an option to elect a cash-out in lieu, and all distributions made in accordance with the pari passu intercreditor agreement. The disclosure statement explains the 2-7% range as illustrative, with the low end representing the recovery under the intercreditor agreement and the high end the recovery for holders electing to cash out, and states the range reflects a recovery on secured claims and no recovery on any deficiency claims. The cash-out amount was filed on August 17 as an exhibit to the plan supplement, which sets it at a 7.5% recovery on principal, calculated against an aggregate first lien term loan claims principal amount of $394,026,303 before giving effect to any roll-up, and illustrates it at $15.8684 per cashed-out interest assuming one million common equity interests are issued to funding consenting lenders.

Class 6 holders would receive a pro rata share of the total general unsecured claim consideration. That consideration consists of fixed consideration of $1.0 million in cash, a savings consideration equal, to the extent positive, to the amount budgeted for professional and advisor fees less amounts actually paid and estimated to accrue through the effective date, and a first day consideration equal to $15.5 million less the aggregate amount of first day payments as of the effective date and not less than zero. The whole is subject to an aggregate cap of $3.0 million and a proportionate reduction if allowed Class 6 claims total less than $27.8 million. The disclosure statement notes the $27.8 million estimate is preliminary and subject to material change.

Under a settlement among the official committee of unsecured creditors, the debtors and the ad hoc group memorialized in a term sheet filed July 31, 2026, the pari funded debt, second lien and third lien deficiency claims are waived as of the effective date and receive no distribution, the aggregate amount payable on account of allowed professional fee claims of the committee's professionals is capped at $1.95 million, the committee's investigation budget is increased to $75,000, the carve-out for the committee's professionals is increased to $150,000, and the final financing order includes agreed soft marshaling language. In exchange the committee agreed to support the restructuring, including by forgoing challenges, not seeking standing to pursue them, recommending that general unsecured creditors vote to accept the plan, and not objecting to relief substantially consistent with the term sheet.

The plan contains a debtor release and a third-party release. Both are carved back for obligations arising after the effective date under the definitive documents, causes of action on the schedule of retained causes of action, and claims arising from acts determined by a court to have resulted from fraud. The third-party release carries a fourth carve-back the debtor release does not: any indemnification obligation of the company to the consenting investor, Tango Stockholder Holdings, LLC and their related parties in connection with unpaid receivables purchase obligations or the debtors' governance documents. With respect to claims against the debtors, the third-party release applies only to acts occurring from the petition date through the effective date.

Releasing parties include holders who vote to accept, are deemed to accept, vote to reject, are deemed to reject, or whose vote is solicited but who do not vote, in each case where the holder does not affirmatively opt out. Holders of general unsecured claims are releasing parties only to the extent they receive or retain a distribution. An entity is not a releasing party if it opts out or timely objects to the third-party release through a formal objection filed on the docket that is not resolved before confirmation. Exculpation runs only to acts from the petition date through the effective date and excludes acts determined in a final order to have constituted fraud.

The plan has not been confirmed, the objection deadline has not passed, and both objections remain unresolved. The following items were open as of the docket reviewed for this report.

Regulatory approvals

The plan sets twelve conditions precedent to the effective date. One is obtaining all authorizations, consents, regulatory approvals, rulings and documents necessary to implement the plan and the restructuring transactions. Conditions may be waived by the debtors only with the prior written consent of the required consenting ad hoc group lenders and the required funding consenting lenders.

The independent investigation

The special committee's investigation into claims against related parties remains ongoing and is expected to conclude during these cases. The plan's releases run to released parties subject to the fraud carve-out and the schedule of retained causes of action.

Voting

Classes 3 through 6 are entitled to vote. The support percentages in the restructuring support agreement are stated by lender group rather than by class. The voting report is due August 31, 2026.

Professionals

Sidley Austin LLP is counsel to the debtors. Katten Muchin Rosenman LLP was retained by order entered August 5, 2026 as counsel to debtor U.S. TelePacific Corp. at the sole direction of the special committee; the disclosure statement describes the engagement as having been made by U.S. TelePacific Holdings Corp. Triple P TRS, LLC provides a chief restructuring officer and additional personnel, with Triple P TAS, LLC providing transaction advisory services, and PJT Partners LP is investment banker.