Cloud communications provider Avaya has filed for Chapter 11 bankruptcy protection – the second time in six years it has done so.

Avaya Holdings Corp filed for Chapter 11 bankruptcy protection on Tuesday in the US bankruptcy court for the Southern District of Texas, after struggling to overcome a decline in its cloud subscription revenues in 2022 which caused it to miss Wall Street earnings targets, as well as borrow $600m.

The Durham, North Carolina-based firm said the Chapter 11 filing will allow it eliminate more than 75 percent of its debt; substantially increase its cash and strengthen its liquidity position; and move forward with one of the strongest balance sheets in the industry.

Chapter 11

In a press release Avaya added “these actions will not impact the company’s customers, channel and strategic partners, suppliers, vendors or employees.”

Avaya has listed total assets of between $1bn and $10bn, and total liabilities of between $1bn and $10bn.

The company lists its number of creditors as being between 25,001 and 50,000, but insists it has “overwhelming support of more than 90 percent of the Company’s secured lenders” for the Chapter 11 filing.

Completing the restructuring will reduce Avaya’s total debt by more than 75 percent (or $2.6bn), from approximately $3.4bn currently, leaving it with a debt burden of approximately $800m.

Additionally, it will substantially increase Avaya’s cash and strengthen its liquidity position.

“I joined Avaya to help unlock the power of its iconic brand, global customer footprint, massive partner ecosystem, large-scale communications deployments and outstanding team,” said CEO Alan Masarek.

“Building on this tremendous foundation, we have made significant progress pioneering an ambitious business model transformation, establishing a competitive product strategy for our subscription and cloud-delivered services and implementing operational efficiencies to better serve the Avaya ecosystem,” said Masarek.

“Strengthening Avaya’s capital structure is a critical step to fully realise our transformation, and we are excited to move ahead as a well-capitalised company with one of the strongest balance sheets in our industry that includes substantial cash to invest in our own success,” said Masarek.

“We appreciate the strong support from our investors, who recognise the incredible value in Avaya’s business, brand and opportunities ahead,” added Masarek. “I also thank our customers and partners for their continued trust, as well as Avaya’s team members for their unwavering focus on providing exceptional service and support to those we serve.”

“With this additional financial strength, we will be ideally positioned to accelerate innovation and advance our cutting-edge, long-range product roadmaps for the benefit of our customers,” Masarek concluded.

The firm expects to complete the Chapter 11 process in 60 to 90 days.

Second time the charm?

This is now the second time in six years that Avaya has entered Chapter 11 bankruptcy protection.

The company last entered Chapter 11 on 19 January 2017, before returning as public company on the NYSE on 15 December 2017.

Avaya undertook the 2017 Chapter 11 so it could refinance the debt it originally took on when it went private in October 2007, when it was brought out by private equity firms Silver Lake and Texas Pacific Group for $8.2bn.

In 2021 Avaya had 8,063 staff worldwide, but last September it began restructuring by cutting jobs in an effort to cut costs.

It is not clear how many positions were axed.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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