As Avaya, a global unified communication and collaboration software vendor, announced its intention to financially restructure its US operations, senior regional executives clarified that the regional operations would not be affected. Financials for regional operations have not been included in the bankruptcy filing of US chapter 11.
“The company’s foreign affiliates are not included in the filing and normal operations will continue in the Middle East and Africa region,” clarified Avaya’s Mohammed Areff, Vice President, Middle East Africa and Turkey.
“It is important to note that Avaya is keenly focused on minimising disruption to its customers and does not expect to experience any material disruptions during the process. The company is operating its business as usual, and is fully committed to providing its customers and partners with the same products and industry service as always,” he added.
Avaya has also not gone ahead with global divestment of any of its product or business divisions, that may have had an impact on regional operations. As part of the available options to financially restructure, the company evaluated expressions of interest in various Avaya assets, including its Contact Center business. After extensive evaluations, they determined that such sale options would not provide sufficient value.
Pradeep Vasudev in his LinkedIn blog points out that if Avaya can restructure its $6 billion debt, it would be a very profitable company.
The full Avaya announcement appears below.
Avaya and its domestic subsidiaries have 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. The Company’s foreign affiliates are not included in the filing and will continue normal operations.
The Company has obtained a committed $725 million debtor-in-possession 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, Chief Executive Officer of Avaya. “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 Center business. 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 Center business at this time would not maximise value for Avaya’s customers and all of its stakeholders. Avaya remains in ongoing negotiations to monetise certain other assets, as appropriate, to maximise value for all stakeholders.
“This is a critical step in our ongoing transformation to a successful software and services business. Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time. Now, as a result of the terms of Avaya’s debt obligations and the upcoming debt maturities, we need to recapitalise the Company,” continued Kennedy.
“Our business is performing well, and we are confident that we can emerge from this process stronger than ever, as this path is a reflection of our debt structure, not the strength of our operations or business model. Pursuing restructuring through chapter 11 will enable us to reduce Avaya’s debt and interest expense, while providing increased financial flexibility to further invest in innovation and growth to enhance our market-leading competitive position. Most importantly, we are keenly focused on minimising disruption to our customers, partners, and employees and do not expect to experience any material disruptions during the chapter 11 cases.”