Avaya Files For Chapter 11 Bankruptcy After Cloud Subscription Accounting Woes
The UC giant, which is filing for bankruptcy for the second time in six years, listed in its filing unsecured claims valued in millions from the likes of Verint Americas, Microsoft and solution provider giant SHI International. Avaya’s CEO says the company is poised for a ‘transformation.’
Struggling unified communications giant Avaya Holdings Corp. filed for Chapter 11 bankruptcy protection Tuesday in federal court in Texas.
The filing follows months of speculation of a bankruptcy declaration following Avaya’s 2022 cloud subscription accounting problems that led to substantial earnings and revenue target misses.
Durham, N.C.-based Avaya said in a press release that “these actions will not impact the company’s customers, channel and strategic partners, suppliers, vendors or employees.”
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In its bankruptcy court filing, Avaya lists total assets of between $1 billion and $10 billion and total liabilities of between $1 billion and $10 billion. The company lists its number of creditors as being between 25,001 and 50,000.
The firm in the court filing lists the creditors with the largest unsecured claims include Verint Americas in the amount of $22.93 million; Microsoft for $9.01 million; Wistron Corp. for $8.9 million; and solution provider giant SHI International for $7.71 million.
Avaya previously filed for bankruptcy in 2017.
Avaya’s stretch of financial difficulties began in May when the company reported that it had missed its revenue target and posted a considerable earnings miss with revenue that declined 20 percent during the company’s third-quarter 2022, which ended June 30, 2022. The company then made the move to replace Jim Chirico, the company’s CEO since 2018. Alan Masarek was brought on in August as president and CEO after serving as Vonage’s CEO for six years.
“I joined Avaya to help unlock the power of its iconic brand, global customer footprint, massive partner ecosystem, large-scale communications deployments and outstanding team,” Masarek said in a statement published on Tuesday. “Strengthening Avaya’s capital structure is a critical step to fully realize our transformation, and we are excited to move ahead as a well-capitalized company with one of the strongest balance sheets in our industry that includes substantial cash to invest in our own success.”
In late December, Avaya said its stock could be delisted from the New York Stock Exchange because the average closing price of the its common stock was less than $1 over a consecutive 30 trading-day period.
Completing the financial restructuring will reduce the company’s total debt by more than 75 percent, from approximately $3.4 billion today to approximately $800 million, Avaya said. Additionally, Avaya said it has secured committed financing of approximately $780 million.
The financial restructuring will give the company improved financial flexibility to boost up its investment in communications products, solutions and services for customers, including the Avaya Experience Platform, its cloud-based Contact Center offering, Avaya said.
Avaya’s strategy includes a multistep process of shifting its portfolio and customers entirely to cloud—whether it’s private, multitenant or somewhere in between. It will also include a “cultural revitalization” that will allow Avaya to bring in the right talent for the work ahead, Masarek told CRN in an interview when he joined the company.
The company said it expects this financial restructuring to be completed within 60 to 90 days.
Kirkland & Ellis LLP is serving as legal counsel to Avaya, Evercore Group L.L.C. is serving as financial advisor and AlixPartners LLP is serving as restructuring advisor.