Mitel Files For Bankruptcy With Plans To Reemerge, Pursue Hybrid Cloud Opportunity

Mitel has struggled financially in the UC and collaboration market that's led by market heavyweights Zoom, Microsoft Teams and Cisco Webex. The company said that the financial restructuring shouldn't impact partners.

Mitel formally filed for Chapter 11 bankruptcy protection Monday, citing "macroeconomic challenges" as the company hopes to maintain its position within the unified communications (UC) space.

The UC specialist in recent years has struggled to keep its footing in the market that’s crowded with the likes of giants Zoom, Microsoft Teams and Cisco Webex. The company has faced declining revenues, and it believes that a restructuring of its finances will allow it to better invest in its long-term, hybrid cloud strategy and join the leaders in the UC and collaboration (UC&C) market.

According to a filing with the U.S. Bankruptcy Court for the Southern District of Texas on Monday, Mitel said it estimated the number of creditors to be between 10,001 and 25,000 and its assets to be between $1 billion and $10 billion. Its liabilities were listed as estimated between $1 billion and $10 billion.

According to the bankruptcy filing, the biggest creditors included Estech Systems IP of Plano, Texas, which is owed $2.1 million; Amazon Web Services, which is owed $1.3 million; Rackspace, which is owed $1.3 million; and Microsoft 365-focused Martello Technologies Corp. of Canada, which is owed $1.3 million. Other creditors listed include Tech Mahindra Limited, Softchoice, RingCentral and Atos.

Searchlight Capital Partners in 2018 took Mitel private about a year after its blockbuster $530 million acquisition of competitor ShoreTel. The new agreement announced early Monday is with an ad hoc group of its senior lenders, junior lenders and other stakeholders to put a new ownership and financial structure in place.

The Canada-based company said that the actions will have minimal, if any impact to customers, partners or employees. The company expects to complete the process in 60 to 90 days. Vendors are expected to be paid in full, Mitel said.

“For over 50 years, Mitel has pioneered and adapted to the ever-changing communications industry, shaping how organizations worldwide connect and communicate,” said Mitel CEO Tarun Loomba in a statement. “We are confident the steps we are taking to optimize our capital structure will make us a stronger company primed for efficient and sustainable growth. Our strengthened capabilities at the end of this process will ensure our ability to continue to support customers and partners with innovative solutions, incorporating emerging technologies, and meeting their evolving needs for secure, reliable communications solutions for years to come. We look forward to becoming an even stronger vendor to our customers through this process, better positioned to power their most meaningful connections and to address the increasing preferences for hybrid communications solutions, globally.”

The process will allow Mitel to deleverage its balance sheet by approximately $1.15 billion and reduce its annual cash interest expense by approximately $135 million, the company said. Mitel's operations outside of the U.S., Canada, and select business segments in the U.K. are not included within the Chapter 11 filing.

"This is a positive step for Mitel as it will enable us to better align the business to capitalize on market opportunities and drive efficient growth," a spokesperson for the company said in an email.

Mitel in 2023 bought Unify, the UC and collaboration business of Atos, for an undisclosed sum in a move that the company said at the time would strengthen its position across multiple geographies and become a more formidable competitor to the likes of UC and collaboration market leaders such as Cisco Systems. The company also recently revealed partnerships with the likes of Zoom and Genesys as the company builds out its hybrid cloud portfolio.

Mitel is not the only UC provider in recent years to file Chapter 11 bankruptcy. Avaya at the beginning of 2023 filed for Chapter 11 bankruptcy protection due to cloud subscription accounting problems. The company emerged from bankruptcy later that year.

David Harris contributed to this report.