Avaya files for Chapter 11 bankruptcy, won't sell contact center assets

Avaya has $6 billion in debt maturing within a year and said that its balance sheet was hampering its transformation to become more software and services based.
Written by Larry Dignan, Contributor

Avaya said it has filed to restructure in Chapter 11 bankruptcy protection, obtained debtor-in-possession financing, and decided it won't sell off its contact center unit at this time.

In a statement, Avaya noted that its foreign affiliates aren't included in the filing and will operate as normal.

Avaya said the $725 million in debtor-in-possession financing, via Citibank, is enough to minimize disruption and continue business operations. Avaya's products cover communication and messaging, video conferencing, call center, networking, and software and services.

The company said the bankruptcy restructuring will give it leeway to change its debt structure. Selling off units such as its Contact Center business would hurt its efforts to restructure debt at this time. However, Avaya said it is in ongoing negotiations to monetize other assets.

CEO Kevin Kennedy said:

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 recapitalize the company.

Separately, Avaya reported its fourth quarter and 2016 results. The company posted a net loss of $505 million on revenue of $958 million, down from $1 billion a year ago. For the fiscal year ending September 30, Avaya reported a net loss of $750 million on revenue of $3.7 billion. Avaya has $6 billion in debt maturing within a year.

Avaya was a spin off of Lucent Technologies in 2000 and became a private company in 2007 via a deal with Silver Lake and TPG Capital valued at $8.2 billion. In 2009, Avaya acquired Nortel Enterprise Solutions to expand into networking.

CES 2017: The Big Trends for Business:

Editorial standards