Avaya has confirmed that it has filed for Chapter 11 bankruptcy protection in a move CEO Kevin Kennedy said "is the best path forward."
"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 Kennedy 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 Santa Clara, Calif.-based company said it has commenced a formal proceeding to restructure its balance sheet to better position itself for the future. To facilitate the restructuring, Avaya said it has filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
Avaya's foreign affiliates are not included in the filing and will continue normal operations, according to the company.
The company has $6 billion in debt and needs to raise $600 million for a debt maturity in October 2017.
Avaya said it obtained a committed $725 million debtor-in-possession financing facility underwritten by Citibank, subject to court approval. This financing, according to Avaya, combined with the company's cash from operations, is expected to provide sufficient liquidity during the Chapter 11 cases to support its continuing business operations and minimize disruption.
The company said it will not sell its contact center business.
As part of Avaya's plan to address its capital structure, the company said it evaluated expressions of interest in various Avaya assets, including its contact center business. 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 center business would not maximize 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," said Kennedy. "Now, as a result of the terms of Avaya's debt obligations and the upcoming debt maturities, we need to recapitalize the company."
Kennedy said the company's business is "performing well" and he is confident it will emerge "stronger than ever."