Telecoms vendor Avaya has filed for bankruptcy, owing the channel millions, but promises the process will mean it comes back “stronger than ever”.
As it does so, there will no doubt be a number of anxious creditors across the industry – not least key distribution partner Avnet, to whom the vendor currently owes $8.8m in unsecured debt. The distributor is the vendor’s second biggest unsecured creditor, behind only ODM Wistron which is owed more than $10m across two entities.
Big reseller partners are also among the embattled vendor’s biggest creditors, including World Wide Technology and SHI, which are owed $1.6m and $1.25m, respectively. A number of other big-name vendors have also extended large amounts of credit to Avaya, including HPE on $5.2m, SalesForce.com on $4.05m, Oracle on $3.25m, and IBM on $3m.
The California-based telecoms firm yesterday announced that its US-registered Avaya Inc entity and a number of its subsidiaries have filed for US chapter 11 bankruptcy protection. Certain overseas-based “affiliates” are not included in this and will reportedly carry on to trade as normal – although an entity called Avaya EMEA Ltd is named in the filing.
As the company bids to undertake a restructure that will ensure its future, it can lean on a $725m ‘debtor-in-possession’ financing package, underwritten by Citibank. Before deciding to enter chapter 11, the vendor revealed that it listened to “expressions of interests” from parties wishing to acquire certain of its assets.
This included at least one approach for its core contact centre business. But the company’s board decided that a sale would not currently deliver the best possible value for customers and shareholders.
“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.”
Concurrently, Avaya today released 2016 results that showed full-year revenue down 9.3 per cent to $3.7bn (€3.48bn). Adjusted EBITDA came in at $940m, which the company claims is a rise of 4.4 per cent on the prior-year figure.
“Our business is performing well, and we are confident that we can emerge from [the bankruptcy] 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. Most importantly, we are keenly focused on minimising disruption to our customers, partners, and employees, and do not expect to experience any material disruptions during the chapter 11 cases.”
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