Avaya Inc files for Chapter 11 bankruptcy
Unified communications specialist says move is aimed at reducing $6bn debt and opens door for rebound
Unified communications (UC) specialist Avaya Inc, has announced that it has commenced a formal proceeding to restructure its balance sheet to better position itself for the future.
To facilitate this restructuring, the company filed voluntary petitions under Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
The company's foreign affiliates are not included in the filing and will continue normal operations.
In the filing, Avaya stated that it has obtained a committed $725m debtor-in-possession (DIP) financing facility underwritten by Citibank. Subject to Court approval, this DIP financing, combined with the company's cash from operations, is expected to provide sufficient liquidity during the chapter 11 cases to support its continuing business operations and minimise disruption.
"We have conducted an extensive review of alternatives to address Avaya's capital structure, and we believe pursuing a restructuring through chapter 11 is the best path forward at this time," said Kevin Kennedy, CEO of Avaya in a statement. "Reducing the company's current debt through the chapter 11 process will best position all of Avaya's businesses for future success."
As part of Avaya's comprehensive assessment of options to address its capital structure, the company evaluated expressions of interest in various Avaya assets, including its Contact Centre business. The vendor added that after extensive evaluation in consultation with its financial and legal advisors, the Avaya Board of Directors has determined that focusing on the company's debt structure is paramount and a sale of the Contact Centre business at this time would not maximise value for Avaya's customers and all of its stakeholders. Avaya remains in ongoing negotiations to monetize certain other assets, as appropriate, to maximise value for all stakeholders.
The vendor said the filing is a restructuring effort to combat Avaya's $6bn in debt. The burden of debt has been following Avaya for nearly a decade since it was acquired for $8.2bn in 2007 from private equity firms Silver Lake Partners and TPG Capital. Avaya also needs to raise $600m for a debt maturity due in October 2017.