Avaya in Talks to Give Lenders Control of Company — Report

Avaya Holdings has a plan to hand over control of the company to lenders, according to unnamed sources. Company officials are in negotiations with Apollo Global Management, Ares Management and Invesco, first-lien lenders.

That’s according to Bloomberg, which says giving such control is part of a pending Chapter 11 bankruptcy filing. This would allow Avaya to continue operating and to figure out how to repay creditors. The company might file for bankruptcy as early as the end of the month.

To financially back Avaya while in bankruptcy, the “telecommunications firm has also started discussions with select lenders about potential debtor-in-possession financing,” according to Bloomberg.

Avaya’s financial crisis came to the forefront last year when the company fired former CEO Jim Chirico and replaced him with Alan Masarek, previously a Vonage executive.

Avaya’s Alan Masarek

Masarek said at the time that he looked forward to leveraging his background and years of cloud communications experience to “propel Avaya to renewed growth and profitability.”

However, cracks soon appeared in the company’s plans to move forward. In August, revenue for Avaya was down 20% year over year in the third quarter to $577 million, according to its earnings report. The third quarter also showed losses in the range of $1.3 billion-$1.4 billion.

In addition, Avaya borrowed $600 million in June. The company has a large chunk of convertible debt maturing in 2023. Last summer, Avaya announced cost-cutting measures of $225 million-$250 million and later implemented a round of layoffs.

2017 Bankruptcy

In 2017, Avaya emerged from its first chapter 11 bankruptcy as a public company with about $350 million in cash. It had less than half the debit it had when it filed earlier that year.

At the time, Tom Eggemeier, now interim CEO of Zendesk, was president of omnichannel customer experience and call center solution provider Genesys.

“It’s clear Avaya is behind in terms of innovation and delivering leading technologies, and one would have to assume that their current financial state will only compound those challenges. As a result, this is causing partners to carefully consider new vendor partnerships to best serve them in the future,” Eggemeier said at the time.

Five years later, an Avaya partner shared his perspective with Channel Futures on Friday.

Ryan Rowland, co-owner of Adaptiv Advisors, said he isn’t convinced Avaya is doing enough to appeal to this segment.

“Why do I want to entrust my customers to a company clinging to the past when the market is saturated with innovators and forward-thinking competition who started in the cloud and aren’t encumbered with decades of legacy hardware, code and business practices?” Rowland told Channel Futures last summer. “There is precedence for enterprises reinventing themselves and coming out stronger than ever, but the actions of Avaya speak louder than their words and I’m not wholly optimistic on their future,” Rowland said.