Avaya announced that it has filed for Chapter 11 bankruptcy to “restructure its balance sheet to better position itself for the future”, but won’t sell off its contact center business.
Avaya said it has obtained a committed $725 million debtor-in-possession (“DIP”) financing facility underwritten by Citibank. Subject to court approval, that DIP financing, combined with Avaya’s cash from operations, is expected to provide sufficient liquidity during the Chapter 11 cases to support its continuing business operations and minimize disruption.
Avaya added its foreign affiliates are not included in the filing and will continue normal operations.
“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 CEO Kevin Kennedy. “Reducing the company’s current debt through the chapter 11 process will best position all of Avaya’s businesses for future success.”
After extensive evaluation in consultation with its financial and legal advisors, the Avaya board of directors has determined that focusing on its debt structure is paramount, and a sale of the contact center business at this time would not maximize value for Avaya’s customers and all of its stakeholders.
Avaya remains in ongoing negotiations to monetize certain other assets, as appropriate, to maximize value for all stakeholders.
Kennedy said the business is performing well, and he was confident that Avaya can emerge from bankruptcy stronger than ever, “as this path is a reflection of our debt structure, not the strength of our operations or business model.”
He said pursuing restructuring through Chapter 11 will enable Avaya to reduce its debt and interest expense, while providing increased financial flexibility to further invest in innovation and growth to enhance its competitive position.
“Most importantly, we are keenly focused on minimizing disruption to our customers, partners, and employees and do not expect to experience any material disruptions during the Chapter 11 cases,” he said.