Avaya Files Chapter 11 Bankruptcy, Won't Sell Call Center Business

Ending several weeks of speculation about its future, Avaya on Thursday said it has filed for chapter 11 bankruptcy protection to reduce its debt.

Also, Avaya said it isn’t planning to sell its call-center business because doing so “would not maximize value for Avaya’s customers and all of its stakeholders.” The company’s foreign affiliates are not included in the bankruptcy filing and will continue normal operations.

Avaya has been transitioning from a legacy hardware business to a software and services company, and has been looking for ways to decrease its debt load of about $6.3 billion.

“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, Avaya’s CEO. “Reducing the company’s current debt through the chapter 11 process will best position all of Avaya’s businesses for future success.”

Avaya has obtained a $725 million loan to support its continuing business operations. It is being provided by an affiliate of Citibank.

Avaya said it is negotiating to sell other assets to maximize stakeholder value.{ad}

“This is a critical step in our ongoing transformation to a successful software and services business,” Kennedy said. “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. Our business is performing well, and we are confident that we can emerge from this process stronger than ever, as this path is a reflection of our debt structure, not the strength of our operations or business model. Pursuing restructuring through chapter 11 will enable us to reduce Avaya’s debt and interest expense, while providing increased financial flexibility to further invest in innovation and growth to enhance our market-leading competitive position.”

Avaya is focused on minimizing disruption to its customers, partners, and employees, and does not expect to experience any material disruptions during the chapter 11 process, he said.

Brendan Read, senior industry analyst of digital transformation at Frost & Sullivan, said Avaya’s moves should be good news, and “will hopefully bear fruit for its existing and potential enterprise and contact-center customers, its channel partners and for its investors.”

“Avaya has a strong customer base, brand reputation, and solutions pedigree, and it continues to enhance its applications, such as with its just-released Avaya IP Office Contact Center 10,” he said. “These factors, along with others such as a gradually growing economy, and trends such as onshoring contact centers, have helped to drive its revenue gains. Avaya is well-placed to …

{vpipagebreak}

… continue to build on, or acquire, and aggressively market innovative and integrated automated and live assistance multichannel voice, text and video customer contact and unified communications applications, with seamless migration paths between them, that can link customers to the resources, whether bots, agents or subject-matter experts, that can best help them. Avaya has the experience, the know-how, the people and the support of its customers to make that happen. Avaya’s success in implementing this vision will help shape its future.”  

Vlad Shmunis, founder and CEO of UCaaS provider RingCentral, said Avaya’s bankruptcy news is a “cautionary tale that reflects a bigger theme in the enterprise solutions space — mobility is dramatically impacting business models.”

“Legacy on-premises players in every industry are feeling pressure from the rapid growth and adoption of cloud solutions, and the enterprise communications market is no exception,” he said. “Because of today’s mobile and distributed workforce requirements, the move to the cloud is continuing to accelerate while on-premises systems vendors struggle to survive. It’s because of this shift that we will continue to see disruption in the business communications space.”

Channel Partners will be in attendance next month at Avaya Engage in Las Vegas, where the company no doubt will get a lot of questions from customers and partners.