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Avaya files for bankruptcy

Communications company Avaya has announced that it filed for Chapter 11 protection in the US Bankruptcy Court for the Southern District of New York.

According to the company, the move will enable them to restructure their balance sheet to better position the business for the future. “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, 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.”

The privately held Santa Clara, California-based company said it obtained a $725 million loan, which was underwritten by Citibank, to fund its operations during the filing. Subject to Court approval, the financing, combined with the Avaya’s cash from operations, is expected to provide sufficient liquidity during the Chapter 11 case to support its continuing business operations and minimise the disruption to its customers, partners and employees.
The company said it will not sell its contact centre business. As part of Avaya’s plan to address its capital structure, it evaluated expressions of interest in various assets. However, after discussions with its financial and legal advisers, the board of directors determined that focusing on Avaya’s debt structure was paramount and a sale of the contact centre business would not maximise value for customers and 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,” said Kennedy.

The Avaya CEO underlined that “the business is performing well,” and that they are confident this process will enable them to “emerge stronger than ever.”

He also mentioned that the move is a reflection of Avaya’s debt structure and not the strength of its operations or business model.

Avaya’s foreign affiliates are not included in the filing and will continue normal operations, according to the company.

Nidal Abou-ltaif, President, Avaya International, said, “For Avaya’s Middle East and Africa operations we expect to continue business as usual – and to build on the success we achieved in 2016. As the FY2016 results announcement underlines, operational performance continues to remain strong, reflecting the strength of our technology portfolio. 2016 was a year of innovation for Avaya, with 16 major solution launches, a company record. Avaya had many highlights across the region, reporting double-digit growth for our networking business and adding major new customers in the real estate and oil and gas sectors. We also saw significant interest in our cloud business, with many customers looking at our cloud service offerings.”

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